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National air carrier El Al is currently putting together an emergency plan, whose centerpiece is cutting down expenses following a loss of $12.4 million during the first quarter of 2006 and even worse second-quarter results.

The plan includes possible cancellations or significant cutbacks on unprofitable lines. El Al's bottom line suffered from sky-high fuel prices and fierce price competition, TheMarker learned yesterday.

The new plan calls for a dramatic reduction in outlays, from various fees the company pays to cargo transport costs. At this stage, the plan does not call for salary cuts or layoffs.

"El Al needs to reevaluate in the face of fuel prices jumping to $75 a barrel," a company executive said.

"Competition has turned especially fierce," the executive noted in reference to Lufthansa offering $330 tickets to Europe, claiming such prices were being offered at a loss.

None of the efficiency measures will adversely affect service to passengers, the executive insisted. "The company works no worse operationally. There's a rise in passenger traffic, but the effects of external factors like fuel are fatal. The dollar's exchange rate also dropped. Therefore, we're working on improving efficiency," he continued.

El Al declined to comment on the report.