Passenger Transportation in Israel

Business profile - Passenger Transportation

Passenger Transportation - Characteristics

A large number of parties operate in the passenger transportation sector, in businesses of various descriptions: cooperatives, private companies of various sizes, taxis, independent drivers, tourist vehicles and more. The principal activity in the sector includes transporting domestic tourism and incoming tourism, transporting employees, transporting soldiers and transporting pupils to school.
Another possible division is by the vehicles operating in the sector. Today the principal vehicles are ordinary buses, tourism class buses, minibuses (15 - 20 passengers), vans (10 passengers) and tourist vehicles.

Passenger Transportation - The market

Two large cooperatives operate in the sector, Egged and Dan, which account for a significant portion of the market. During the past three years the Ministry of Transport has begun a process of reducing the cooperatives' share by issuing tenders for travel routs in various regions. Some of the private companies competing in the tenders are members of voluntary organisations in the framework of the Israel Truckers Council.
The sector is governed by provisions and regulations. Government ministries such as the Ministry of Transport and the Ministry of Tourism require companies to meet threshold conditions in order to be granted a licence and set conditions for receiving permission to transport tourists. Many companies engage independent drivers who own buses, as subcontractors. This phenomenon exists primarily in the domain of small buses.

Passenger Transportation - Customers - definition of the target market and its size, market segmentation

The principal customers of passenger transportation companies are public or private concerns including, inter alia: travel agencies and domestic or incoming tour arrangers, institutional parties - schools (transporting pupils), factories (transporting employees), local authorities, the Ministry of Defence and occasional and one-time trips - including family celebrations.

Passenger Transportation - Competitors

The large cooperatives, similar rival transportation companies - in accordance with the sector, private tourist vehicles in the domain of tourism, taxis - mainly in the domain of transporting employees and tourists. Competition in the sector is very severe, mainly because of the surplus transportation capacity and the large number of transportation companies.

Passenger Transportation - Marketing methods

The main marketing methods that are customary in the sector:
" Participating in tenders conducted by large institutional concerns - the Ministry of Defence, local authorities and large factories
" Employing salespeople
" Direct mailing to relevant parties
" Advertising in the Yellow Pages and on the company's vehicles
" In the domain of tourism - marketing packages and tours by means of travel agencies and in the tourism press

Passenger Transportation - Factors affecting success

Creating a balance between long-term contracts with institutional concerns and engaging in activity among a variety of customers and a number of sub-marketers, optimal utilisation of manpower resources and vehicles and supplying travel packages and complementary services.

Passenger Transportation - Entry barriers in the sector

The magnitude of the initial investment required for creating a motor pool, the licensing barrier and the time interval required in order to obtain it, working capital needs until contracts have been formulated, work performed and income for the business generated.

Passenger Transportation - Manpower

Professional manager - in this framework professional certification on behalf of the transportation supervisor at the Ministry of Transport is required.
Traffic safety officer
Drivers - with a driving licence for transporting passengers, in accordance with the type of vehicle they drive
Salespersons
Tour guides - in addition, travel packages guided by tour guides for transportation services, engaging independent guides as subcontractors
General workers - secretary, bookkeeper, maintenance etc.

Passenger Transportation - Equipment required

Buses or other vehicles are required in amounts corresponding with the requirements of the Ministry of Transport (or the Ministry of Tourism - if the company engages in transporting tourists as well). Additional equipment required includes a communications system, office furniture, telephony infrastructure, computer and more.

Passenger Transportation - Customary payment terms

Customers: the payment terms for regular customers are generally determined by contract or annual agreements. The payment terms for travel agencies engaging in incoming tourism are generally EOM + 30.
Suppliers: the payment terms for working with a garage that services the vehicles are generally EOM + 30
Fuel - it is possible to arrive at payment arrangements with a regular petrol station or by using cards such as Pazomat or Dalkan.

Passenger Transportation - Licences and certification

A business licence from the local authority is required. In order to obtain a licence, approval from the Ministry of the Environment and the police are required and must be renewed annually. A licence from the Ministry of Transport is required. If the company is also engaged in transporting tourists, then a licence from the Ministry of Tourism is required as well.

Passenger Transportation - Insurance

Vehicle insurance - compulsory, third party and comprehensive. Building and content insurance, third party insurance, employer's liability insurance if there is an office, and loss of profit insurance.
In addition to the aforesaid, consulting with an insurance agent regarding additional insurance is advisable.

Passenger Transportation - Relevant addresses

Ministry of Transport - Traffic Division, 97 Yafo Street, Jerusalem, Tel. 02-6228604 or 02-6228613, Fax 02-6228671.
Ministry of Tourism - Tourist Transporters Department, 24 King George Street, Jerusalem, Tel. 02-6754880
Israel Truckers Council, 34 Yitzhak Sadeh Street, Tel Aviv, Tel. 03-6392777