Is the resigning Israeli army chief of staff, Dan Halutz, slated for a job at El Al (TASE: ELAL)? That very possibility has been the talk at the airline for a week now, say managers at the privatized airline. The speculation grew all the more strident today after Halutz announced his resignation yesterday.

El Al chairman and owner Izzy Borovich firmly denied the possibility, saying it was not true and that he was not negotiating with the career soldier.

El Al CEO Haim Romano also denied the report, saying he knew nothing of it.

Vide-chair Tami Mozes-Borovich was also unambiguous in her denial, saying Romano is an excellent CEO and that if he left the company, so would the shareholders.

Shares in El Al are rising 2% on the Tel Aviv Stock Exchange as of writing, bucking the generally negative trend. The leading TA-25 index is losing 0.9%.

In recent weeks El Al shares have risen more than 20% as oil prices retreat.

Halutz will be temporarily replaced by the deputy chief of staff, Moshe Kaplinsky. Halutz vowed that he would guarantee a smooth transfer of power.

Defense Minister Amir Peretz spoke with Halutz by phone and expressed regret over his decision, a Defense Ministry spokesman said Wednesday. But top General Staff officers welcomed Halutz's decision Tuesday night, saying it was necessary in view of what has come to light regarding the IDF's wartime functioning.

Ehud Olmert's bureau said the prime minister knew ahead of time of Halutz' intention to resign, and had asked him reconsider. Olmert accepted the resignation, however, once he became convinced of Halutz' resolve to quit, and expressed deep regret at the decision.