The Finance Ministry is opposed to compensating the tens of thousands of Israeli passengers whose flights were canceled due to the closure of the skies during the war with Iran in June.
Speaking at the Knesset Economics Affairs Committee on Monday, Finance Ministry representative Daniel Schwartz stated that the decision follows a review of a proposed framework for compensation of stranded passengers and airlines who suffered financial losses during the closure of Israel’s airspace.
In recent weeks, the Knesset Economic Affairs Committee held three discussions on the matter, urging the government to swiftly agree to pay a share of the costs borne by Israeli and foreign airlines, as well as the tens of thousands of consumers whose flights were canceled.
Israel’s airspace remained almost entirely closed during the 12-day conflict with Iran that began on June 13, leading to waves of flight cancellations by domestic and foreign airlines that left between 100,000 and 150,000 passengers stranded abroad. Many had to pay for extended stays and alternate flight tickets, often at double or triple the original price, to be able to return home — and some to serve in the army during the war.
“Following meetings with industry officials and discussions with senior officials, the finance minister decided to oppose any compensation for the aviation industry,” said Schwartz. “The cost is estimated at hundreds of millions of shekels or more, depending on various parameters and the number of nights for which compensation is being paid.”
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During the heated committee debate, Knesset Economic Affairs Committee chairman MK David Bitan called Finance Minister Bezalel Smotrich’s decision “unreasonable given the circumstances.”
Israeli passengers on Arkia’s first repatriation flight leaving from Larnaca to Tel Aviv’s Ben Gurion Airport on June 18, 2025. (Courtesy Arkia)
“Is it reasonable that, as a professional body, the Finance Ministry does not want to compensate anyone? Is the state not responsible for what happened, that citizens were stranded abroad?” Bitan asked Schwartz in response. “State compensation is granted to workers and the entire economy, but not to airlines and citizens who were stranded?”
Bitan urged Prime Minister Benjamin Netanyahu to intervene, resolve the dispute, and pave the way for a fair and appropriate compensation plan without any further delay.
“It’s a scandal,” said Bitan. “The state will not be able to get away without payment — it will take time, but the state will have to bear responsibility.”
Bitan cautioned that the committee plans to formulate a framework that could serve as a basis for the courts to hold the state liable.
The lack of agreement between the Finance Ministry and the Transportation Ministry over who bears responsibility for compensation leaves passengers and airlines in legal and financial uncertainty. The current aviation law obligates airlines to provide assistance services and financial compensation, depending on the circumstances, and is not adjusted to disruptions for extended periods of emergency.
As a result, Israel’s flag carrier El Al, smaller Israeli rivals Arkia and Israir, and some foreign airlines are already facing pending class action lawsuits from passengers whose flights were canceled during the Iran conflict for multiple days.
Knesset Economic Affairs Committee chairman MK David Bitan (third from right) speaks at a meeting in Jerusalem, August 11, 2025. (Courtesy)
Earlier this year, Israeli lawmakers approved a proposal to amend the 2012 Aviation Services Law, which protects the consumer rights of passengers whose flights have been canceled.
As a result, the compensation paid by airlines to passengers in the event of flight cancellations will be restricted at the expense of the consumer during an emergency war period. The legal amendment was passed in its second and third readings in the Knesset, but the order still needs to be signed by Transportation Minister Miri Regev.
Regev will be authorized to declare a special emergency in the event of a war, or airport closure, and limit the legal obligation by airlines to provide accommodation due to a flight cancellation to two nights.
At the committee meeting, Civil Aviation Authority head Shmuel Zakai said that Regev insists that the two nights covered by the order are no longer sufficient to provide adequate compensation.
“In addition to the two days that the airlines must compensate, the state must fund another three days,” said Zakai. “Without the state’s participation, she does not believe she should sign the order.”
Arkia CEO Oz Berlowitz lamented that claims are piling up for airlines, and currently, there is little response for customers.
“I sent a letter to the prime minister regarding compensation, and we received no response,” Berlowitz said.
El Al Vice President of Commerce and International Affairs Shlomi Zafrani emphasized that “from discussion to discussion, the issue is pushed back and forth, and the consumer public is left without an answer or certainty.”
“It’s time to create solutions,” urged Zafrani.
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