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El Al airlines management and worker representatives have entered a new labor agreement that may lead to employee layoffs. The deal is mentioned in a memo of understanding, obtained yesterday, stating that management will hand worker representatives its requests for implementing a new recovery plan in light of the company's recent financial woes.

The two sides will then immediately enter accelerated talks to implement the plan. Worker representatives approved the plan, which freezes current salaries and job conditions. The agreement is effective through the end of 2007.

The plan provides for a 3 percent bonus should the company end the year with a profit of $10 million or more. Likewise, El Al employees would receive a further 3 percent bonus at the start of 2008.

However, that scenario seems rather unlikely, as the company has been losing money and has already issued a profit warning. The airline lost $15.1 million during the second quarter compared to a net profit of $29.9 million during the parallel 2005 quarter.

While the third quarter is usually the most profitable, the war hit El Al's pockets, as the company suffered a 12 percent drop in passenger traffic on its El Al scheduled and Sun Dor charter flights.

El Al CEO Haim Romano commented, "The compromise of the workers giving up their wage bonuses bears testimony to the maturity and responsibility they are demonstrating."

Tsahi Tabakman, general manager of the Histadrut's trade union department, said, "The deal proves that through dialogue and agreement, it's possible to obtain positive results both for management and for employees."

The agreement is conditional on approval by the El Al board of directors.