El Al Israel Airlines is considering splitting into two companies as part of a new strategic plan - a low-cost carrier and a premium carrier.

Indeed, the airline needs efficiency measures and might face new competition due to the open-skies agreement that Israel signed with the European Union.

One of the two companies would specialize in premium long-haul flights to destinations such as the United States and the Far East, while the second would compete against low-cost airlines on European routes.

The two firms would share the same management.

The long-haul company would use El Al's new wide-body planes, including Boeing 777s. The planes would be upgraded with fully reclining seats, and ticket prices would be set accordingly.

The second company would use El Al's smaller planes, including Boeing 737s. This would help it compete against low-cost airlines, which are expected to increase Israeli operations once the open-skies treaty takes effect.

"The company is working to develop a strategic plan involving its future structure," El Al said.

The company lost $49 million last year, and management is in talks with workers over new efficiency measures. El Al is asking workers to accept fewer free flights and to pay for meals based on their salary levels. It also wants to put up flight crews in hotels outside city centers.

In addition, the company's chairman, chief executive and board members have accepted 20% salary cuts, while managers have seen their salaries cut by 7% to 10%.