JNS
The class action lawsuit, reinforced by damaging economic analysis, claims El Al owes travelers 600 million shekels ($169 million) in damages for price manipulation.
El Al airlines is facing a class action lawsuit alleging the Israeli carrier systematically exploited wartime market conditions to extract excessive profits from its customers.
The comprehensive legal challenge, reinforced by damaging economic analysis from professor David Gilo, the former director of the Israel Competition Authority, claims El Al owes travelers 600 million shekels ($169 million) in damages for price manipulation schemes that generated unprecedented windfall profits.
The lawsuit reveals a stark transformation of El Al's financial performance during the war. Attorney Ilan Vardnikov, representing passengers through the Pearl Cohen law firm alongside Tal Rotman and Adi Tzitron, documented how the airline's 2024 net profits exploded to $554 million—potentially reaching $771 million after accounting adjustments—compared to just $113 million in 2023.
This represents El Al's highest earnings in over 15 years, surpassing the company's cumulative profits from the decade and a half preceding the current conflict.
"Unfortunately, El Al was not satisfied with the enormous profits it generated from the state of emergency and war legally, and chose also, deliberately and knowingly, to abuse its monopolistic power and harm consumer freedom of contract by inflating flight prices," the petition states.
The legal challenge exposes how market dynamics shifted dramatically following the Oct. 7, 2023, Hamas onslaught on Israel, when foreign carriers abandoned Israeli routes en masse.
Regular international airlines, including budget carriers, immediately suspended operations to Israel, while American and European airlines maintained only minimal service throughout 2024, according to industry reports cited in the lawsuit.
This exodus created unprecedented market concentration, with El Al achieving monopolistic control over 20 of 24 examined flight routes, sometimes commanding market shares exceeding 50%.
"Most regular foreign airlines, including low-cost companies, immediately stopped flying to Israel ... during 2024, regular American and European airlines operated in Israel at low frequency," according to El Al reports quoted in the petition.
The Israir airline also reported that "many flights by foreign companies to and from Israel were canceled until further notice. This fact significantly reduced competition in passenger transport to Israel during the war period."
"Demand for El Al flights throughout 2024 was significantly increased... and sometimes even beyond the demand that El Al experienced routinely during peak periods," according to the carrier's reports.
Extraordinary profit margins amid falling costs
Gilo's economic analysis reveals the most damaging evidence against El Al's pricing strategy. Despite the airline's claims of wartime pressures, operational costs actually declined in 2024 compared to 2023 and 2022.
"Meanwhile, average ticket prices surged by tens of percentage points across multiple routes, generating profit margins per passenger kilometer that increased 15-fold compared to pre-war levels.
"There was no increase in El Al's costs justifying the increase in flight prices. On the contrary, costs decreased in 2024 by 3% compared to 2023 and by 11% compared to 2022," Gilo concluded in his expert opinion. "Surplus revenues rolled directly to the profit line."
The financial data presents a striking picture of wartime profiteering. Net profit margins per customer flight kilometer reached 28.5% during the first three quarters of 2024, representing a 180% increase compared to the year preceding the conflict. After accounting for an exceptional $103 million employee bonus distribution, El Al's overall profit rate hit 35%.
International comparisons further underscore the excessive nature of El Al's pricing strategy. While global flight prices declined according to IATA (International Air Transport Association) data, El Al increased prices by 14.3% on average during 2024, reaching 16.9% in early quarters.
Among 10 foreign airlines examined for comparison, only three implemented price increases, and at significantly more modest rates.
El Al's profit performance dramatically outpaced industry standards, achieving a 29.5% profit rate per customer flight kilometer, 4.8 times the average among foreign competitors (6.1%). The airline's return on active capital reached 37.8%, quadruple the normal industry benchmark and El Al's own weighted cost of capital.
The petition emphasizes how El Al's pricing strategy served no legitimate economic purpose beyond profit maximization. "The flight price increase was not required to increase output or for any other justified purpose, and could not bridge the gap between demand for flights and the depleted supply. Price gouging contributed nothing to consumers, and did not benefit them or the Israeli economy," Vardnikov argued.
Regulatory limitations expose enforcement gaps
Current regulatory responses highlight significant enforcement limitations within Israel's competition framework. Both the Competition Authority and the Consumer Protection and Fair Trade Authority initiated investigations into El Al's wartime pricing practices, but lack sufficient legal mechanisms to compel profit restitution to affected passengers.
Administrative remedies are limited to fines or financial penalties that may prove inadequate deterrents against future market abuse.
"Compensating El Al customers is just, fair, and required, and without it there cannot be future deterrence against abuse of monopolistic market power during wartime, distress, and national crisis," the petition argues, positioning judicial intervention as the primary avenue for meaningful consumer relief.
El Al's official response stated, "The petition for approval of the class action lawsuit has not yet been received by the company. After it is received, the company will study the petition and submit its response to the court as required.
“It should be clarified that the company acted and acts by the law, including regarding flight prices," the airline stated.
Originally published by Israel Hayom.
