Transportation Minister Yisrael Katz directed Israel's Civil Aviation Authority on Monday not to sign an "open skies" agreement with the European Union until his office examines the potential effects such an agreement would have on Israeli airline companies.

Talks on an "open skies" framework, which would replace a number of bilateral agreements with European countries with a single Israel-EU agreement, have been ongoing for several years, but a deal between the sides has proven elusive.

Such an agreement is meant to lower the price of flights by introducing competition in the form of new airlines into the Israeli market. The next round of talks between Israel and the EU is scheduled for March 20.

Katz promised on Monday that he would take into account the interests of Israel's commercial airlines in any agreement to increase competition in Israel's aviation sector.

In a meeting with the heads of Israel's three commercial airlines – El Al, Arkia and Israir - Katz said he would not sign any such agreement before considering its effects on their economic standing.

Katz made the remarks in a meeting with the heads of Israel's three airlines.

Earlier on Monday, the Histradrut labor federation declared a labor dispute between employees of the three airlines and management. The workers are threatening to strike in two weeks if the companies do not agree to reconsider a number of steps which the workers fear would cut into their salaries.

Workers' committee chairman Yigal Cohen said on Monday that the workers "view with utmost gravity management's attempts to hurt workers' salaries, especially following a period in which we displayed dedication and loyalty."

Earlier this week, Haaretz reported that Israeli carriers were discussing a possible merger in light of the difficult state of the industry.