Gaza War Devastates Israeli Tourism Revenue, Points to Fragile Apartheid Future

By Juan Cole

A Hamas rocket hit and destroyed a house in Yahoud, a town only a mile from Ben Gurion Airport in Israel on Tuesday, raising severe alarm in among the international airlines and leading most of them to cancel flights to Tel Aviv. The US Federal Aviation Administration called for a 24 hour moratorium on US flights to Israel, and United Airlines, U.S. Airways and Delta Air lines said they would cease flying there “until further notice.” The European Aviation Safety Agency likewise cautioned European airlines from flying to Israel, and Lufthansa and other major carriers cancelled their flights.

Israel’s Transportation Ministry, in its charming way, stridently denounced the airlines as accomplices of terrorists, saying “there is no reason whatsoever that American companies would stop their flights and hand terror a prize…” In fact, the downing of MH17 over eastern Ukraine is obviously the context for the airlines being spooked. And, if a rocket can land one mile from the airport, it can land on a plane at the airport just as easily.

Israeli tourism brought in $11 billion last year, some 4.5% of its nominal GDP. Tourism employs 100,000 workers, two-thirds of them in the hotel industry. In other words, a full loss of tourism would cost Israel $30 mn a day and could idle nearly 3% of the country’s workforce. (Since El Al is still flying, there hasn’t been a full loss of tourism, but El Al is probably flying many planes that aren’t full and may take an economic hit on that account alone; jet fuel is expensive and nowadays full planes are necessary to avoid losing money).

Here are the major countries of origin for the tourists last year:

US: 623,000
Russia: 603,000 tourists
France 315,000
Germany 254,000
United Kingdom 217,000
Italy 173,000
Ukraine 134,000

A quarter of all visitors described themselves as pilgrims. Over half said they were Christians and a little over a quarter were Jewish.

Some observers assumed that the FAA and EASA decisions were made at the behest of political leaders in the US and Europe and were intended to pressure the Israeli government to wrap up its Gaza War. These allegations were denied by the two agencies. But then they would say that, wouldn’t they? The US State Department has also issued a travel advisory for Israel.

If the airlines cease flying to Israel for a long while, the economic pain would be great, a loss of hundreds of millions to as much as $900 mn. a month. It is likely that the business classes in Israel will begin pressuring PM Binyamin Netanyahu to end the Gaza engagement as soon as possible, given how bad it is for business.

The true significance of the airlines’ decision and that of the aviation regulation agencies lies not in its short term effect on the Israeli economy. Rather, it is a demonstration effect of how Israel is becoming vulnerable. When Netanyahu attacked Gaza in 2012, life and the economy went on normally in Israel. But in 2006 during the Israeli attack on Lebanon, Hizbullah rockets made fully a fourth of Israelis move out of their homes, away from the north, as they went to stay in with friends further south. But the rockets are gaining in range.

In essence, Hamas by targeting the airport (it wasn’t trying to hit a house in Yahoud but rather the runway at Ben Gurion International) has hit upon a new strategy, of imposing willy nilly an international boycott on Israeli aviation.

The airlines’ decision will likely motivate the Netanyahu government to attempt to disarm Gaza permanently and to attempt to make sure that Hamas can never again put the Tel Aviv airport in danger. But wanting to disarm Hamas and doing it aren’t the same thing. And once Israel leaves Gaza, what will stop Hamas from restocking?

Israel’s Likud government ought to (but won’t) take the opposite lesson from the airlines’ decision. It is that Israel is vulnerable economically unless it makes peace with the Palestinians by giving up its settler-colonial enterprise. It has to stop sending in squatters on Palestinian land and make preparations for pulling the settlers out.


Related video:

AP: Airlines Halt Travel to Israel Amid Violence

33 Responses

  1. Regardless what the US FAA decides on 23 July, the economics of whether to provide flight service to Israel is fairly straight forward to figure out:

    >> Positives . . .

    – Customer price – El Al (the Israel national carrier) vastly over charges its customers (because they can). As a result, it should be easy for another carrier to charge slightly less and still make a very nice profit (if the costs are manageable – more on this in a minute).

    – Customer service – El Al provides extremely TERRIBLE customer service to all its customers that are not Israelis Jews. Even non-Israeli Jews get terrible service because if they were “real Jews” they would live in Israel instead of mingling with the riff-raff out in the world.. Even carriers that have mediocre customer service can easily be much better than El Al.

    >> Negatives . . .

    – Fuel costs – Because Israel has angered most of the places on earth with oil and gas, Israel has to pay a high premium for oil based products including aircraft fuel. Because “heavy” jets can not land with large fuel loads, any aircraft servicing Israel have only two choices (1) load a full fuel load at Israelis prices (2) load a small fuel load and fly to a close-by airport with lower prices to top up the tanks for the rest of the trip, adding at least an hour to any flight.

    – Security costs – Israeli’s paranoia requires carriers to leap through expensive flaming hoops to fly to/from Israel. The carrier has to eat these costs.

    – Insurance costs – This is a MAJOR cost. While insurance companies like to receive insurance premiums, they really hate paying out claims for aircraft damage/destruction and/or passenger and crew injuries or death.. Israel is a known war zone and the danger to the aircraft is huge, so the insurance companies are getting really scared, especially after MH17 was blown from the sky. By the time all the lawsuits are settled for MH17, the insurance carriers and Malaysia Air will probably pay out between $350 and $500 million (a Boeing 777 costs ~$300 million) because there is very little chance Russia will actually accept responsibility and pay it. Note that even an older B747 can cost over $200 million. Right now, every insurance company is re-evaluating their insurance policies and are probably severely restricting them to minimize loss. The brutal reality is, other than El Al which has a blank check for the government of Israel, no carrier can fly without insurance.

    – Air Crew costs – In the past, air crews have typically either refused to fly into war zones or have required “combat pay” and supplementary life insurance policies so if they do get killed, their families are well taken care of. Any airline that tried to force the situation would end up with major union problems and could end up with the entire system grounded because of a strike.

    When the positives and negatives are weighted, it is easy to see most airlines coming down on the “it is not worth the bother” side of the equation.

    As one commentator pointed out, the reason Israel wanted to keep the west bank was to “protect” Ben Gurion Airport from attack. Modern missiles have made a mockery of that idea. The harsh reality is ALL of Israel is now a target zone and when the current Jordanian government falls, Israel will be in the cross hairs from the north, south, east and west. Maybe Israel should re-think how they treat their neighbors.

    • I’m curious about one item you touched on — insurance coverages for air flights. Do insurance companies pay for damages caused by acts of war? Will this be a way for insurers to dodge having to cover the loss of Malaysian Air 17 (or similar flights)?

      • As Dr. Cole noted, war does indeed void most insurance agreements.

        But to make sure the insurance company has no liability, insurance companies usually notify the insured as soon as a risk is knowable. In this case, the insurance companies are proactively telling the insured, they are fully exposed if they fly into Israeli (or Ukrainian) airspace. Since no one wants to be on the hook for $300 to $500 million, the airlines stop flying into documented war zones. Note that El Al can fly because the state of Israel provides back-up insurance, so even though the primary insurance provider has no doubt voided the agreement, the state will cover the full loss. When you can’t lose, then just fly.

        You can’t really fault the insurance companies because their business model is to collect as much money as possible while paying out none.

        Note that for MH17, I have no doubt the insurance companies will try to avoid paying, but given that all aviation governing bodies thought it was safe to fly at 32000 feet over Ukraine, the insurance companies will probably have to pay eventually (although they will try to avoid that as long as possible).

  2. But, but, but… Marc Regev kept saying in that interview with Jon Snow, that thousands of rockets were raining down on Israeli cities. And yet the good folks in Sderot could put some bleachers out in the sun and watch the fun in Gaza. And the Israeli transport ministry either knows the rockets aren’t much of a threat, or else doesn’t seem to value the lives and safety of airline passengers very highly.

  3. I had thought the rockets were a sign of desperation, an ineffective and counterproductive activity. Yet these rockets have sent millions of Israelis rushing to bomb shelters, forced the mobilisation of tens of thousands of troops, and created massive disruption to the Israeli economy – the closing of the airport being the latest indication.

    In addition Israeli troops have had little option but close quarters urban fighting in a crowded city – the very worst option for a technologically advanced army. In a city their overwhelming firepower creates civilian casualties while they blunder into prepared defences.

    The paradox of the Gaza missiles is their ineffectiveness in killing is their strength. Netanyahu has not a single “telegenic dead Israeli child” to display to the world while the world media displays picture after picture of dead Palestinian children. Yet he can not ignore the missiles.

    No wonder the Israelis are bemoaning the failed ceasefire. and Kerry is keen to intervene. Hamas can string the Israelis along for weeks to come – or step up their resistance against the Israeli stranglehold at any time.

    • If you “run the numbers” in a realistic way, it quickly becomes clear that Israel does not have the resources for a long term war and the US can not afford to subsidize Israel, especially with tens of thousands of Americans living on the economic edge and elections coming quickly.

      Every war REQUIRES three things:

      – Cannon fodder – that is, lots of humans to die for the cause. A realistic estimate is Israel only has about 3 million humans usable as cannon fodder. The number is probably even less because most humans flee wars and almost half of the Israelis have a second passport and “run funds” stashed away.

      – Material to waste – These are all the war toys that get destroyed. Israel’s real numbers are not huge (less than 400 combat aircraft, 3 active subs, etc). In addition to a rather limited amount of stuff, the US has also heavily depleted its own stock, so Israel would have little it could get from the US.

      – Wealth – While Israel is a fairly prosperous country, it does not have a lot of reserves. Any war will immediately stop most economic activity and dry up tax revenue. Again the US will not really be able to help because Americans will deeply resent their cash going to Israel when Americans are starving.

      Israel does not have a very good future if it does not figure out how to get along with the neighbors they CHOSE to live next to.

  4. Israel faces no loss and no disincentive. The US Congress will simply pass “supplemental” funds to make up any loss and will create tax incentives to visit Israel. The President–whoever he may then be–will sign the bill.

    • Shouldn’t the news media inform the public with front page headlines and new breaking TV news when Congress takes such actions: “The US Congress will simply pass “supplemental” funds to make up any loss and will create tax incentives to visit Israel. The President–whoever he may then be–will sign the bill.”

      Oh, I forgot. The billionaires controlling the news medias and the US Congress (government) wouldn’t allow it. They’re part of the private corporation, The Federal Reserve” that will loan the money to the US Government to give to Israel and charge interest that keeps America in debt and makes the evil billionaires richer and more powerful.

      Oh, second thing. The news medias are not about real news, only propaganda by the billionaires to keep Americans unconscious and brain washed for easy control.

    • Russians go to nearby warm places when they can; they are also a third of tourists to Egypt and a lot go to Turkish beach resorts. These are cheaper than say the French Riviera, nearer, and just as much fun.

      • It may also reflect the resurgence of Orthodoxy, particularly one that looks abroad, in Russia. The pilgrims at the Holy Sepulcher and other Christian sites in Jerusalem are heavily Russian these days.

  5. The credibility of and the sympathy for Israel is largely due to the holocaust and the persecution of Jews down the years. This is rapidly dissolving now that Israeli’s are behaving more like the perpetrators than the victims and it seems to me that an emphasis on a ‘Jewish State’ is an attempt to get this sympathy back. The big problem I see with this is that it will transform an Israeli/Arab problem into a Jewish/Muslim problem.

  6. Taking Hamas fully out would present Netanyahu with a bit of a dilemma: He NEEDS them for the unifying threat they represent. Part of what brought about the current situation was the threat of Hamas unifying with the other Pal actors in a peaceful and effective manner.

  7. “Gaza War Devastates Israeli Tourism Revenue” Juan Cole.

    It may appear so for few days & Israel will beat every drum for its propaganda that will be repeated by American news media that Israel has lost so much money due to closure of Ben Gurion Airport, arms & ammunition in the war with terrorist Hamas therefore badly needs American help.

    Congress will allocate billions to Israel, with a promise from Israel that congressman will not lose their seat in next elections. The money going to Israel will never be reported by American news media to American public while Americans hard-earned money will go in Israel’s pocket & its hand in Americans pockets.

  8. Gaza War Devastates Israeli Tourism Revenue,…

    If Israeli tourism revenue is affected badly enough, the lobby will just have to shake Congress for more aid.

  9. What Israel faces is the need to finally disarm Hamas …a terrible delema ..they need Hamas to fight off a Palestinian state…yet can’t have Hamas getting even stronger after the next ceasefire…or Egypt going to aiding Hamas ,for some reason or another…considering that Hamas can not ever agree to disarming…and seemto be ready to fight to the end ..we are looking at a coming blood bath and utter destruction of gaza…this is a perfect example of human madness at work

    • It is 100% IMPOSSIBLE for Israel to disarm Gaza.

      Yes Israel can try to kill as many as possible, but at a certain number of dead (a number that Israel has no way of knowing), the world will permanently tip and severely punish Israel. Not even the US will be able to protect Israel.

      Israel wants to walk up to that line, but not go over because going over destroys Israel. The problem is that line is very vague and changing and Israeli could easily walk off that cliff before they even know they have.

      The BEST thing Israel could do if it wants a future is to stop the belligerence and NEGOTIATE with Hamas.

      • Operation Cast Lead was the practical upper limit as to what Israel could do without sustaining truly significant outrage in the international community that would result in painful economic sanctions.

        1,400 Gazans killed and only 13 Israelis. 94% approval rating by Israeli public.

        Right now Israeli polls show 80% public support for Operation Defensive Edge – and 71% want to see it expanded.

  10. Another thing this episode in the Gaza conflict reveals (not a “war” so much as it is “shooting civilians in a barrel,” — to coin a phrase) is how easy it would be for the U.S. to stop the killing. Obama has many levers to use, if he had the will. Instead, we continue to enable this horror, as we have done for decades. We hear a lot of complaints from our government about Russia’s guilt, because it provided the weapon that downed the airliner over Ukraine. But we are guilty of far more deaths, and for the ongoing dispossession and oppression of the the Palestinian people. (To say nothing of what has happened, and continues to unfold, in Iraq and elsewhere. For that matter, our hands are hardly clean even in Ukraine.)

  11. While lots of these comments here about the effects of this war of liberation of the Palestinians cheer me up, i do get depressed when I hear our media as well as entities like the EU parlaiment condemning Hamas’ rockets without a condemnation of Israelis’ occupation and siege. The subtext here is you’ll get your rights and your freedom if and when Israel decides to give them to you, not a moment before. It is such an abdication of the responsibilities of the UN and other international bodies. They all cower before the Almighty USA!

    • …you’ll get your rights and your freedom if and when Israel decides to give them to you,..

      Or when some Arabs outbid the Israel Lobby for the favors of the political courtesans in Congress.

    • The Arab Peace Proposal has been on the table for over ten years.

      It calls for a much smaller and much less armed Israel. That is, Israel would have to give up lots of land, water, cash (for compensation) and apologies for everything they have done since WW1.

      The Arabs are resigned to Israel existing, but not in the form it is now.

      The problem from the Israelis point of view is that while they would have a “Jewish” state, it would be small and powerless, thereby destroying the Jewish myths of superiority.

      • The problem for the Israelis is that they would have to terminate the Zionist program of ethnic cleansing they have been working on for generations. They are not about to do that.

        • In reality, The Zionist program of ethnic cleansing is going to stop, one way or another, in the not too distant future because it is not sustainable.

          Over the last 10,000 years of human history, exactly ZERO groups have been able to dominate other groups indefinitely. In the long term all the dominate groups always end up being defeated (often brutally) and returning to the bottom of the heap.

          I can not predict the exact timing, but I can predict with certainty that Israel will cease to exist.

          If Israelis want to have a country in the future, they need to change their entire way of thinking. But given the massive stupidity humans are capable of, I suspect that no matter how clearly Israelis are warned, they will continue on the path to their destruction.

  12. Palestinians don’t even have an airport – or normal sea or land access to their prison/home. Needless to say, they don’t do well in the tourism department either.

  13. Well, they can’t have it both ways. We’re supposed to believe that Israel is under constant bombardment, that they’re all terrified and running back and forth to bomb shelters all day – and that this can’t be allowed to continue… but then when the airlines cancel flights, they object and say it’s perfectly safe. So which is it?

  14. Just wait until Hamas gets drones. They’re as small as, and therefore as survivable as, the rockets they use now, but capable of precise targeting. They would probably be used to take down Israel’s water and power grids, and then it would be game over.

    • Or the Palestinians could add a simple but reasonably accurate guidance system to their rockets.

      A 32-bit Raspberry Pi computer costs less than US$35 from a wide variety of sources (most NOT controllable by the US or Israel). Couple that with a GPS chip (US$10), any one of several open source real-time operating systems (US$0) and some simple control motors and the Palestinians could be dropping a rocket right on top of Israeli infrastructure and commercial aircraft. Note that the Palestinians only have to blow up one empty B747 sitting on the tarmac at Ben Gurion Airport to permanently shut it down.

      This illustrates one of the very invalid assumptions that Israelis have about their future – They appear to assume their opponents will not dramatically improve over time, which is a very bad assumption to make.

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