Knesset panel demands state share losses to passengers and airlines during Iran war

Request comes as major European and US airlines are still avoiding Israel after Iran ceasefire came into effect, and are weighing future flight operations to the country

Lawmakers on Sunday urged the government to agree on a compensation framework that will provide legal certainty to both consumers whose flights were canceled when the country’s skies were closed because of the recent war with Iran, and to Israeli and foreign airlines that suffered losses.

Knesset Economics Affairs Committee Chairman MK David Bitan, lawmakers, and aviation representatives called on the ministries of transportation and finance to formulate a special compensation plan that will protect consumers and assist airlines to help ease the financial costs of disruptions during the war.

“Ultimately, if we don’t issue an order that adapts the Aviation Services Law to the emergency situation, the state will have to pay much more to airlines because of the damages that will be caused to them,” said Bitan. “If the government doesn’t step in, it saves NIS 200 million ($69 million) now, but it will cause enormous damage to consumers who will pay three times as much for a plane ticket because foreign companies will not want to fly to Israel for fear of class action lawsuits.”

When the war erupted on February 28, Israel initially closed its airspace to civilian traffic completely, forcing all airlines with routes serving the country to cancel, and leaving tens of thousands of passengers stranded abroad. After a week, it eased restrictions, though operations were still at only a fifth of pre-war levels, and only Israeli airlines – El Al, Arkia, and Israir — were authorized to operate.

El Al and other local airlines have warned that without state intervention to pay compensation to passengers and changing regulations, their stability would be irreversibly damaged, as they continued to operate under missile threats and severe passenger and flight restrictions, while foreign airlines stopped their operations entirely.

“We canceled about 1,500 flights in the past month and lost about $4 million per day of fighting and about $120 million during the conflict period,” said El Al VP of Commerce and Sales Shlomi Zafrani. “We operated rescue flights at a loss out of national responsibility, and we expect the state to provide a response.”

Israir and Arkia representatives said that they suffered losses of about $250,000 per day each due to airport restrictions to air traffic operations during the 40-day war.

“There is no reason to expect airlines to compensate customers,” said Zafrani. “We need a temporary order that essentially exempts airlines from both statutory compensation and reimbursement of direct expenses.”

Over the past two and a half years, as Israel has fought wars with the Hamas terror group, Iran, and foes on other fronts, the country’s airspace was repeatedly disrupted, leading to waves of flight cancellations for travelers to and from Tel Aviv. The cancellations left thousands of passengers stranded abroad and forced them to cover the costs of extended stays.

Following previous rounds of fighting, including the 12-day with Iran in 2025, foreign and local airlines sought relief from regulations that mandate them to compensate passengers whose flights were canceled due to the closure of Israeli airspace and the declaration of special emergency situations.

The airlines have been requesting that the government enforces a legal amendment to the 2012 Aviation Services Law to regulate the question of financial compensation for passengers during emergencies. The law protects consumer rights of passengers whose flights have been canceled or delayed during regular times.

In addition, lawmakers have been demanding that the government help with the costs borne by passengers who suffered losses during the closure of Israel’s airspace.

“If Ben Gurion Airport becomes a nationalized airport for security reasons, it is the government that should step in and pay the required compensation,” said Tibi, who sponsored the original aviation law. “The state in this context is shirking its responsibility and the situation remains up in the air.”

Also speaking at the Economics Committee meeting, Transportation Ministry representative Or Libis clarified that the ministry supports an outline in which the state helps shoulder the costs.

“The law should protect consumers, but the burden should be shared,” said Libis. “We are in talks with the Finance Ministry about a compensation plan.”

The demand for the government to act comes as local and foreign airlines face class action suits from passengers whose flights have been canceled over the past two and a half years of conflict.

“The Aviation Services Law can’t be enforced during periods we can’t fully operate and there are no regular air services,” said Israir CEO Uri Sirkis. “Wizz Air and other foreign airlines are not returning to Israel because they don’t want to be legally exposed.”

Bitan concluded the discussion by demanding that quick solutions be found, and ordered the Transportation Ministry and the treasury to cooperate with airlines on finalizing the matter and present agreements on a compensation plan in two weeks.

“If we cannot produce good news for foreign airlines that will provide them with legal certainty — so they know that that if they resume operations to Israel they won’t find themselves under attack from class action lawsuits worth millions of dollars from passengers that were stuck abroad — we will be doing ourselves tremendous harm,” said attorney Shirly Kazir at the FISCHER (FBC) law firm, which represents a group of foreign airlines, including British Airways.