EL AL is facing a class action lawsuit, as it’s being accused of wartime price gouging. Is this just basic economics, or is it immoral and illegal, as the lawsuit suggests?
In this post:
EL AL accused of exploiting monopolistic position
This week, a class action lawsuit was filed against EL AL in Israel, accusing the airline of significantly raising fares since October 2023, following the Hamas terror attacks, plus subsequent conflict between Israel and Palestine.
The lawsuit argues that once most foreign airlines ceased flying to Israel due to the war, EL AL became the dominant carrier, and used its monopoly status to raise prices. The lawsuit claims this is both immoral and illegal, and accuses the airline of taking advantage of a tragedy to generate massive profits.
The lawsuit is supported by an economic analysis from a former commissioner for competition, who stated that in 20 of the 24 examined routes, EL AL held a dominant market position, and he concluded that price hikes were not justified by any rise in operational costs.
An analysis showed that in 2024, the airline increased prices by an average of 14.2% compared to the previous year. The analysis claims that costs decreased while profits soared. The airline reported a $554 million profit in 2024, compared to a $113 million profit in 2023. The company’s stock price increased, the CEO got a big bonus, and employees even received $103 million in bonuses.
The lawsuit claims that these price hikes not only hurt consumers, but also undermine social solidarity during a time of crisis. The lawsuit calls on the court to order compensation for affected passengers, to deter similar abuses of monopolistic power in the future.
EL AL is now being investigated by the Competition Authority and the Consumer Protection and Fair Trade Authority, with a push for “excess profits” to be returned to the public.
Has EL AL been price gouging consumers?
I’m kind of conflicted regarding the merits of this lawsuit, and I think this sums up so many aspects of what confuses people about airline pricing.
To start, it’s worth acknowledging that war has been very good for EL AL’s bottom line. Ordinarily, unrest wouldn’t give a particular airline an advantage, but EL AL is in a unique position. The carrier’s planes are specially equipped with extra security equipment, and the airline is happy to fly through basically any conflict.
So while supply and demand and general safety concerns usually dictate which routes airlines can fly, EL AL really is in a league of its own when it comes to “owning” a market in times of unrest.
As far as price gouging goes, and the claims in the lawsuit, a few things come to mind. For one, the cost of airfare has never been based on the operational costs, so I don’t find that to be a good argument. Pricing has always been based on what the market will bear. That’s why in the United States, airlines frequently have a higher cost per air seat mile than they have revenue per air seat mile. It’s also why you might find a 2,000-mile flight that costs $100, while a 200-mile flight might cost $300.
With other airlines having pulled out of Israel, obviously demand for EL AL flights increased massively, so there are different ways the airline could handle that. Given the position EL AL was in, fares increasing by 14.2% from 2023 to 2024 hardly seems like that big of a jump, when an airline has a market all to itself, and deals with massively increased demand.
I guess this also raises the question of what a “fair” profit is for an airline. We’re talking about a publicly traded company here that isn’t owned by the government, so is the obligation to provide transportation at a reasonable cost, or to maximize shareholder value? If the economy turns bad and the airline loses money and can’t charge higher fares, should the government guarantee a certain amount of profit, to make up for any shortfall compared to operational costs?
Ultimately I’m not a lawyer, and don’t have a deep understanding of Israeli law, so I can’t speak to the legal merit of this. However, I do think that you can’t really compare the fluctuation in the price of airline tickets to the fluctuation in the price of basic household needs, given the very different pricing models.
Bottom line
EL AL is being sued in Israel for wartime price gouging, with a lawsuit calling the carrier’s actions both illegal and immoral. EL AL is accused of raising prices when other airlines pulled out of the country, in order to achieve record profits.
There’s no denying that war has been good for EL AL, due to the carrier’s unique ability to continue operating flights when other airlines couldn’t. In 2024, the airline reportedly raised fares an average of 14.2%. Is that price gouging, or just a reasonable fare increase to reflect decreased supply? I guess that’s up to a court to decide…
What do you make of this lawsuit against EL AL?
@Sky Key if you guys read this you should put El Al on your site
The class action suit also demonstrates a poor understanding of scarcity economics. When supply is constrained (as in this case with no other carriers flying), it’s natural for prices to increase (for example, the housing market in California).
An increase in prices also ensures that the scarce seats go to those who really need to fly. Say someone needed to go to a family member’s funeral and another person wanted to go on a...
The class action suit also demonstrates a poor understanding of scarcity economics. When supply is constrained (as in this case with no other carriers flying), it’s natural for prices to increase (for example, the housing market in California).
An increase in prices also ensures that the scarce seats go to those who really need to fly. Say someone needed to go to a family member’s funeral and another person wanted to go on a simple vacation to the same destination. A price increase means that the person going to the funeral has a higher chance of getting the seat given they presumably have more inelastic demand (they cannot go somewhere else, cannot go at another time), whereas the vacationer can choose to differ the trip or go somewhere else.
I'm absolutely willing to pay 14,2% more if i'll land at my destination.
You can't say that the war has been "good" for El Al. While they gained a huge amount of market share, the overall market has decreased drastically. Travel to Israel during the war is way down. The flights they are operating are obviously more profitable, but that doesn't mean the situation is a good one.
Their profits tell more than enough about the sad state of affairs there, I'm confident the two are related. The $$$ doesn't 'lie', but I"m sure the tourism, VFR & business travel is at rock bottom levels ..,..
About time they sue "their own". EL AL will probably offer a Palestinian Home as compensation.
When I'm planning a vacation anywhere, I'll keep an eye on airfares and I would consider a 14.2% to be within the range of normal price fluctuations.
If multiple carriers withdrew from this market creating a huge drop in capacity, honestly I'm surprised prices only adjusted 14.2% and not more.
Second rendition of this post.
Israel is currently considered to be in a conflict zone.
The safest way in or out of the country is considered to be by air.
ELAL is undoubtedly the safest air passenger carrier.
Passengers have a clear choice, pay ELAL for the additional security measures or choose an alternative.
In regard to most people who post on this page:
They are unlikely to have...
Second rendition of this post.
Israel is currently considered to be in a conflict zone.
The safest way in or out of the country is considered to be by air.
ELAL is undoubtedly the safest air passenger carrier.
Passengers have a clear choice, pay ELAL for the additional security measures or choose an alternative.
In regard to most people who post on this page:
They are unlikely to have ever been to the Middle East and specifically Israel, nor are they likely to do so.
They are unlikely to have experienced an ELAL flights, nor would choose to take one.
Conclusion: Most people who are posting on this site are doing so due to their ignorance of Middle Eastern history, culture and politics, mainly due to their antisemitism
Wow just wow. Jumping straight to claims of antisemitism. Says way more about you than any other commentator.
Go to it NYGuy24, spill the beans …. enlighten us all?
Isreal is currently a conflict zone. The safest way to travel in or out of the country is probably by air. The safest airline on which to travel is ELAL. Those who wish to travel to or from Isreal have a choice …. pay ELAL for the added security or risk an alternative carrier.
One suspects that most of those who bump their gums on this comments page have never set foot in Isreal,...
Isreal is currently a conflict zone. The safest way to travel in or out of the country is probably by air. The safest airline on which to travel is ELAL. Those who wish to travel to or from Isreal have a choice …. pay ELAL for the added security or risk an alternative carrier.
One suspects that most of those who bump their gums on this comments page have never set foot in Isreal, never mind the Middle East. Furthermore, they have no intention whatsoever for doing so even if they could afford to travel there.
Conclusion: most who post here are doing so due to their ignorance and antisemitic views …. nothing more!
It's amazing how many people think that everything is based on "supply and demand " (a.k.a. Laissez Faire) in most of the economies of the world. That's not the case at all. In most countries there is some form of price control or the other. The only difference is the extent. That said, anti-price-gouging controls, wherever they exist, are usually part of consumer protection laws.
Here in the US, the federal government doesn't do...
It's amazing how many people think that everything is based on "supply and demand " (a.k.a. Laissez Faire) in most of the economies of the world. That's not the case at all. In most countries there is some form of price control or the other. The only difference is the extent. That said, anti-price-gouging controls, wherever they exist, are usually part of consumer protection laws.
Here in the US, the federal government doesn't do much for consumer protection. Most of the price gouging laws are at state level.
Oh I’m sure El Al is guilty over “illegal and immoral behavior”
Please explain Speedbird?
I've flown to Israel 4-5 times since the war started - Only once have I flown a non-stop route on ELAL - There were always alternative airlines if you were willing to fly through Europe or the UAE - Flying through Europe and connecting to ELAL was always an option and was always reasonably priced - So really we are talking about the non-stop flights to the US only - Do I think there was...
I've flown to Israel 4-5 times since the war started - Only once have I flown a non-stop route on ELAL - There were always alternative airlines if you were willing to fly through Europe or the UAE - Flying through Europe and connecting to ELAL was always an option and was always reasonably priced - So really we are talking about the non-stop flights to the US only - Do I think there was some price gouging? YES - DO I think it was illegal, no - Supply and demand, if you were/are willing to fly through Europe it was less and there ARE options - If you want to fly non-stop you pay a premium
The problem with this argument is that the only airline that consistently served Israel without disruption is El Al. And most people traveling to Israel likely want to actually get there. So saying that were reasonable options through Europe is technically correct but fails to account for the frequent disruptions to service to TLV from European carriers.
Now that said, is it fair to say that El Al gets to price gouge as a...
The problem with this argument is that the only airline that consistently served Israel without disruption is El Al. And most people traveling to Israel likely want to actually get there. So saying that were reasonable options through Europe is technically correct but fails to account for the frequent disruptions to service to TLV from European carriers.
Now that said, is it fair to say that El Al gets to price gouge as a premium for reliable service? Maybe, but to an extent.
On the UAE front - The UAE carriers have consistently been flying to TLV to my knowledge but saying that flying 2 hours past Israel is a viable alterative seems like a stretch
I agree with @Al. Like everything else, why done in moderation price gouging slides. It is the extent of that raises eyebrows.
Al, VS …. your arguments fall down due to one little known or advertised advantage ELAL has over any competitors …. enhanced security measures.
The main problem is that El Al is happy to wartime price gouge, but when operations are impacted (cancellations, delays), the airline argues wartime "force majeure" to avoid compensating passengers...
14% price hike is fair. They have the a unique security system to make it safer for them to operate during war time. I 100% think this lawsuit is BS.
“El Al’s net profit in 2024 is higher than the company’s total cumulative profits in the 15 years preceding the war,”
They gouged their customers, so what? If that was illegal - unlikely in the extreme - then they broke no law. As to social unity, there’s not a lot of that going around in Israel right now anyway so I’m not sure why El Al is supposed to be the exception.
The punishment should be draconian and nonspecific... destroy 5 EL AL planes but also 1 Israir, 1 United, 1 Air China, 2 Air Canada planes. Also destroy a hospital and supermarket because some ElAl employee might use them.
LMAO
LOL ... Sounds like Sharia law !
Dan's Deals had a much more thorough, and economically literate summary of the situation.
No, El Al is not price gouging. If El Al raises prices to reflect supply and demand, then you can choose to either pay the market price and fly, or you can decline to do so.
If El Al doesn't raise the prices, you don't have that choice. That choice will be made for you, since flights will be sold out...
Dan's Deals had a much more thorough, and economically literate summary of the situation.
No, El Al is not price gouging. If El Al raises prices to reflect supply and demand, then you can choose to either pay the market price and fly, or you can decline to do so.
If El Al doesn't raise the prices, you don't have that choice. That choice will be made for you, since flights will be sold out the second they go on the market 365 days earlier. Getting to fly at prices below the going market rate isn't one of the choices.
Except Israel during much of the conflict only has one way in or out: on an El Al flight. If you really need to get there, you have no choice and the airline knew that. Raising prices in that situation is dodgy and deserves examination in court.
Except DansDeals didn't provide any evidence that El Al's current high fares aren't already mostly sold out.
Also I don't think he said El Al isn't price gouging. After all, the basic facts are that El Al has largely been the only carrier flying to Israel since 10/7 and they have raised prices which he doesn't dispute. I think his article was more justifying it than saying it isn't happening.
The problem again...
Except DansDeals didn't provide any evidence that El Al's current high fares aren't already mostly sold out.
Also I don't think he said El Al isn't price gouging. After all, the basic facts are that El Al has largely been the only carrier flying to Israel since 10/7 and they have raised prices which he doesn't dispute. I think his article was more justifying it than saying it isn't happening.
The problem again though, is he just doesn't bring any real evidence that the higher prices are actually preventing El Al flights from selling out well in advance. Anecdotally, I know quite a few people since 10/7 that have had a hard time booking El Al tickets even when booking not on short notice.
If you go search El Al flights in late August from NYC for instance, you'll see those flights are sold out in economy. Go look at flights from Miami to Israel at the end of June and you'll see the same thing. Heck when Edan Alexander was released, El Al had to involunatarily bump a passenger to make room for Edan's mom on El Al flight. None of this points to the notion that El Al's high prices are actually keeping planes from selling out.
This is nonsensical. They have a monopoly. People in that country have no other alternative. They are making massive profits.
The Israeli did and does have leverage legally that was never exercised. It is the owner of a "golden share." This mechanism gave the Israeli government ample legal authority to oressure ElAl to reduce fares, which it did recently on a few routes, too few, too late. I am all in favor of a healthy robust ElAl. The airline has significant national responsibility and IMO failed by being opportunistic. The current controlling stockholder received a...
The Israeli did and does have leverage legally that was never exercised. It is the owner of a "golden share." This mechanism gave the Israeli government ample legal authority to oressure ElAl to reduce fares, which it did recently on a few routes, too few, too late. I am all in favor of a healthy robust ElAl. The airline has significant national responsibility and IMO failed by being opportunistic. The current controlling stockholder received a huge bailout not long ago. The lawsuit has some merit, though class action suits reward law firms , typically more than consumers.
Ripping people off is a core Israeli value, color me unsurprised
The comment by Conner is pure anti-semitic or anti-Jew using a common trope.
This comment should have been removed and the commenter barred.
No because Canadians are also people that rip each other off.
Conor, please prove your claim.
Moe, agreed.
derek, you might like to add the U.S. to your claim too? Boeing, have been doing so for decades according to some reports.
I'm embarrassed for you, @Connor.
IMO either you regulate prices or you don't - there's not really a logical middle ground here. Local governments are well within their rights to enact legislation with price caps. But if they don't, then why would anyone expect a for-profit business to charge anything other than what the market will bear? Like you said Ben, this is similar to the solo-upcharge thing in that people don't really seem to understand how capitalism works.
...IMO either you regulate prices or you don't - there's not really a logical middle ground here. Local governments are well within their rights to enact legislation with price caps. But if they don't, then why would anyone expect a for-profit business to charge anything other than what the market will bear? Like you said Ben, this is similar to the solo-upcharge thing in that people don't really seem to understand how capitalism works.
-and that's not intended as an endorsement of the system; I'm generally in favor of regulations that protect consumers. And im in favor of them because the whole point of capitalism and market economies is that businesses predictably act in their own best interests, and it's pretty silly to expect anything else without regulation.
@ breathesrain -- Very well said!
Sadly, the Israeli government has done a very poor job at doing their job and protecting consumers. Took them a very long time to even get El Al to offer capped fares to some European cities.
It’s a simple math of supply and demand. All other carriers ceased flying leaving elal as the only gateway to many destinations. This resulted in all flights near full capacity of passengers and cargo. If one booked flights a bit of time in advance the tickets were no so overpriced.
Let’s keep in mind elal lost a lot of money during the Pandemic and they were able to make that back over the last bit of time
No, it's NOT a "simple math of supply and demand". No government in the world is completely Laissez Faire to allow unbounded supply and demand guiding their economies. In the US price gouging is illegal in many states.
With other airlines pulling out (and some passengers), has El Al had higher load factors than before?
If so, they would have sold the same number (all) of cheapest fare buckets, and more of more expensive fare buckets.
Is the 14.2% increase of average fares, rather than average per fare bucket?
If so, average fare per bucket may have been flat, which doesn't suggest price gouging.
Ver high load factors would...
With other airlines pulling out (and some passengers), has El Al had higher load factors than before?
If so, they would have sold the same number (all) of cheapest fare buckets, and more of more expensive fare buckets.
Is the 14.2% increase of average fares, rather than average per fare bucket?
If so, average fare per bucket may have been flat, which doesn't suggest price gouging.
Ver high load factors would feasibly explain the sharp increase in profit, even without fare increases.
Isn't calling out El Al or any ethnic related entities these days as "Illegal & Immoral" automatically considered antisemitism.
So this post is antisemitism?
But then the weird rule of if you call you own ethnicity, it isn't. Just like certain groups are allowed to use the n-word.
So this post is not antisemitism?
What a confusing period we live in, when everyone is trying so hard for equality yet everyone one is also demanding entitlement.
There is also usually an exception if clearly reporting on an accusation rather than repeating it.
Unless the airline being critised is Ryanair (aka StreisandAir)
I think that whether El Al's price-raising was acceptable or not, this case has nothing to do with antisemitism. This is a case where Israelis are suing an Israeli company in an Israeli court under Israeli law.
Right to my point Joshua K.
If Israelis calling out an Israeli it's not antisemitism.
If someone else calls out an Israeli it's antisemitism.
Many airlines were guilty of price gouging at the beginning of the pandemic too!