Egged on the face: the case for towing Israel’s bus monopoly away

Waiting for bus #947 to take me from the El-Al Junction back to Jerusalem every week day has done wonders for my tan. Yet, while my skin has turned a shimmering shade of golden brown, I’m increasingly seeing red as these long hot summer days have shortened my fuse and increased my frustration with the shoddy service provided by those green whales on wheels, courtesy of Egged.

Fascinated by this lumbering relic’s singular ability to avoid implosion, I did a bit of sleuthing into an Israeli icon. According to its website, the Egged Cooperative, the largest transportation operator in Israel, was established in 1933 when four public transportation companies were merged into one. Today, Egged operates 55% of the country’s public transportation service lines.

Evidently, quite a few other Israelis, during Egged’s 70-year reign as the country’s primary public bus system provider, were kept sweating at dusty bus stops – from Nahariya to Haifa to Tel Aviv to Beer Sheva to Jerusalem – and everywhere in between.  In 2002, an attempt at deregulation was made and this reform resulted in private companies being allowed to take over some Egged routes. The market share of Egged and Dan, the other major Israeli bus company, tumbled from 100 percent to 70 percent.

Nowadays, that remaining 30 percent of the market is divided among no fewer than 14 private transportation companies.

And yet Egged’s inefficiency and poor management hasn’t improved. As it turns out, even after the privatization plan, Egged and Dan were allowed to continue operating in a quasi-monopolistic environment and are mostly protected from any serious competition.

It may have been after the Intercity Volvo (model B12B) bus (in service since 2002!) that was transporting us from Airport City to Jerusalem’s Central Bus Station broke down smack dab in the middle of Highway 1 – at the peak of rush hour, mind you- that I began to ruminate on why this is so and why it should continue to be.

Egged was and remains today a state supported company and monopoly. Moreover, a strong case can be made that Egged would not be able to exist for a single day without the largesse of Israeli tax payers. The Trajtenberg Commission confirmed what most Israelis have sensed for a long time, noting that subsidies given to Egged and Dan (25% more than the subsidies given to smaller companies) just keep going up, while their services continue going down.

In an effort to cut costs and improve service, turning public transportation into a private commodity is an option worth considering. Since public transportation serves a public good, one idea is to have private companies operate the service but have a state agency plan the service. The major advantage of contracting out operations in this manner is to save money. The majority of financial savings are likely to accrue from not having to pay large public sector healthcare and retirement benefits to the contracted out employees.

A second approach to privatization would involve private companies both operating and planning the service. Economically, the complete privatization of Israeli bus companies would benefit all members of society through lower taxes, more competition and lower prices, and higher disposable income.

So breaking up Israel’s bus monopolies may lead to you and me saving a bit on the ride from Tel Aviv to Tel Khai. But will the service provided be more reliable? While privatization is not always the best way to improve efficiency, the problems facing Israel’s bus system will be difficult to address if it remains within the government.

And privatization, even on a limited scale, has already begun to change the very nature of Israeli public transportation. A truly green bus revolution is brewing in Tel Aviv and Haifa, where private bus companies Metropoline and Kavim are in the process of unveiling a fleet of silent, non-polluting hybrid buses. Such innovation and attention to social imperatives, however, can only reach full flower with the active participation of government who, with grants and other incentives, can serve as a crucial link between the conception and implementation of such bold strokes.

Private bus companies that currently account for a mere 30 percent of the bus lines in Israel have generally been run more efficiently and profitably without relying on financial crutches provided by the state and paid for by us. Just imagine how much better and cheaper public transportation in Israel could be if full competition was introduced.

Such are the thoughts that I’ll be pondering this afternoon as I’m legging it to catch the overflowing Egged bus #947. Once on board, I have no fear of getting back to Jerusalem too quickly: the inevitable bus breakdown on the outskirts of Shoresh will provide me with all the spare time a man can handle.

Think I’ll dig up my old Rubik’s Cube and use the time lingering on the shoulder of Highway 1 to finally figure out how to solve that damned thing.