Passenger Transportation

Industry Data

At the end of 2003, approximately 16,500 minibuses, 11,600 busses, and 15,800 taxis were active in Israel. The average number of kilometers driven in the year 2003 by a minibus is 45,000, driven by a bus 66,000 (in comparison to 68,000 in 1999) and approximately 88,300 driven by taxis.


Industry Sub-Division

There are various active organizations in the passenger transportation industry, operating various types of businesses: Co-operatives, private companies varying in size, taxis, independent drivers, tourist transporters, etc.

An alternative segmentation is by type of vehicle. Primary vehicles are regular busses, tourist busses, minibuses (15-20 passengers), transit vehicles (10 passengers), and Eshkol vehicles.


Market Characteristics

There are two large co-operatives active in the industry, controlling a large portion of the market. The regulated transportation industry is predominantly controlled by these two co-operatives. Some private companies are voluntarily united by the Board of Transporters in Israel.

The industry is highly competitive, mainly due to a surplus in transportation services.

This has aggravated over the last two years due to the drastic decrease in incoming tourism, and has caused a significant price drop in the industry.

The transportation industry is standardized by regulations and ordinances. The Ministry of Transportation requires transportation companies to fully comply with threshold provisions in order to become licensed. Ministry of Tourism requirements must also be met in order to receive authorization for tourism transportation.

Many companies sub-contract independent bus owners. This is usually the case for minibuses due to the fact that a minimum of minibuses are required in order to be licensed by the Ministry of Transportation


Customers: Defining the Target Market and Its Size, Market Segmenting

Customers of passenger transportation companies are primarily private or public organizations, and include:

Ø  Travel agencies and tour coordinators (for incoming or internal tourism).

Ø  Organizations- schools (student transportation), factories (employee transportation), local authorities, etc. Organizations usually pre-sign framework agreements or seasonal agreements for regular transportation.

Ø  Ministry of Defense- usually occupies delegated vendors who won a tender for regular and special transportation.

Ø  Occasional or random customers requiring transportation. This also includes family events.








Competition can be segmented according to a number of parameters:

Ø  Large co-operatives that are also active in the tourism, student, and employee transportation markets. 15% of their revenue stems from special transportation, tours, and various package deals. Over the last year, Egged has entered the minibus transportation market by using sub-contractors, which resulted in increased competition and lower prices.

Ø  Parallel transportation companies compete according to branch.

Ø  Private Eshkol vehicles in the tourism branch.

Ø  Taxis stand in competition mainly for tourist and employee transportation.

Ø  The industry is highly competitive, mainly due to a surplus in transportation services.


Marketing Resources

Typical marketing resources in the branch include:

Ø  Participation in large tenders presented by large organizations- Ministry of Defense, local authorities, large factories.

Ø  Employing salespersons.

Ø  Direct marketing to relevant potential clientele.

Ø  Advertising in yellow pages and on company vehicles.

Ø  In the tourism branch- marketing package deals and tours by way of travel agencies and tourist magazines.


Future Development Options

In recent years, there has been a significant decrease in incoming tourism, which constitutes one of the largest transportation consumer groups. The significant decrease in demand for transportation services (along with the decrease in organized tours and employee transportation) has resulted in a supply surplus, a decrease of prices, and for companies to cease from operating. This is expected to persist as long as the recession and decrease in tourism continues.

The Ministry of Transportation has begun privatizing regulated transportation routes and thus allowing competition. This will allow private companies to apply for tenders and increase their activity and the market's activity in general.


Factors Affecting Success:

Ø  Creating a balance between long-term contracts with organizations and conducting activity among various customers and a number of sub-markets.

Ø  Optimal use of vehicles and human resources and supplementing demand by using sub-contractors.

Ø  Offering tourism package deals and peripheral services- a company that in addition to transportation services also offers additional services such as guided tours, lodging, etc., will enjoy a relative advantage over companies that only offer transportation services.


Entry Barriers:

Long licensing process.

High initial investment.

Operating capital requirements until contracts are formulated, and the business becomes profitable.







Human Resources:

Establishing a transportation company requires recruitment and employment of appropriate human resources. Positions are listed below:

Ø  Professional manager prepares transportation and driver layout. A correct and efficient layout can significantly cut company costs, therefore the position must be filled by an experienced and skilled individual. Professional Ministry of Transportation inspector certification is required.

Ø  Transport security officer.

Ø  Drivers with a passenger transportation driver’s license according to the type of vehicle driven. There are many driving schools teaching bus drivers.

Ø  Salespersons- there are a number of courses training salespersons. It is recommended to employ experienced field salespersons.

Ø  Tour guides- in addition to transportation services, some companies offer guided tours. Various tour-guide training is available in the market. Alternatively, independent tour-guides may be sub-contracted.

Ø  General workers including administrative assistants, accountants, maintenance, etc.

Required Equipment:

Busses or other vehicles according to demands of the Ministry of Transportation (or Ministry of Tourism, if the company also operates tourism services). Other equipment includes a communication system, office furniture, telephony system, computer, etc. This equipment may be purchased through a wide variety of vendors.



Industry Revenue and Profitability

Yearly Revenue for Minibuses in 2003

Vehicle type

Yearly revenue (in NIS thousands)

Small public minibus with up to 10 seats


Small public minibus with up to 15 seats



Average yearly revenue for busses in 2003 (in NIS thousands, VAT not included) - calculation is based on 285 full workdays.

Old busses may require up to 15 shutdown days for repairs.  

Minibus- 243-296

Midi bus - 261-330

Tourist bus- 313-330

Bus- 330-382.


Typical Terms of Payment

Payment terms for regular customers are usually determined according to contract or yearly agreements.

Travel agency payment terms are usually EOM+30.

Vendors (mainly referring to regular service vendors such as maintenance and fuel)

Garage payment terms are usually EOM+30.

Fuel- a regular payment arrangement may be reached with a chain of gas stations by using cards such as Pazomat or Dalkan.






Licenses and Certifications:

Local authority licensing is required. Licensing requirements include a permit from the Ministry of Quality of Environment and police. These permits must be renewed on a yearly basis.

Ministry of transportation licensing is required. If the company operates in the tourist industry, Ministry of Tourism license is also required.

Note that busses may not be purchased or operated prior to receiving license.

Updated data can be found on the Ministry of Transportation website:

Procedures and criteria for Eshkol vehicle licensing may be found on the Ministry of Transportation website:



Vehicle insurances: mandatory insurance, third party insurance, and comprehensive insurance.

The insured amount may be extended by increasing the premium. This is recommended as the damage caused in case of an accident may be immense, and damage claims may be very high.

Business insurance (content and inventory) and third party insurance – if the company is utilizing an office.

Employer’s liability insurance.

Loss of income insurance.

In addition to the above, an insurance agent should be consulted in regards to the need for additional insurance.


Relevant Addresses:

Ø  Ministry of Transportation, 97 bank Israel Street, Jerusalem. Phone:  02-6228604 or 02-6228604. Fax: 02-6228671.

Ø  Ministry of Tourism- Tourist Transportation Department, King George 24, Jerusalem Phone: 02-6754880.

Ø  Board of Transporters in Israel, Yitzhak Sade 34, Tel-Aviv. Phone: 03-6392777.



Ø  Companies are advised to emphasize optimal use of resources, mainly vehicle and human resource utilization. Efficient management of scheduling, drivers and vehicles will avoid idle trips and improve the company’s profitability.  Computer software may be used for this purpose.

Ø  Offering additional services such as guided tours, lodging arrangements, etc., will improve the company’s relative advantage.

Ø  Vehicle purchases are usually conducted as a large transaction. Vehicle financing constitutes a large portion of the company's expenses; therefore, all existing alternatives should be examined and compared.

It is recommended to consult with your local Business Development Center regarding business establishment and operations.

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