The state had been paying 60 percent of the airline's security-related expenses but that figure will rise to 65 percent for 2011 and 70 percent for 2012.

Once an open skies deal is signed with the European Union, the Israeli government's share of security costs will increase to 75 percent. The figure will reach 80 percent when the agreement is implemented.

El Al expects its 2011 expenses to be reduced by $5.8 million in 2011, it said in a statement to the Tel Aviv Stock Exchange.

The airline has been a target of attacks by Palestinian militants in the past and its security procedures are among the most stringent of any international airline.

As security costs have remained high, El Al has also been hurt by rising fuel costs, while increased competition from foreign carriers has lowered its market share. Third-quarter profit fell 51 percent to $21 million, with fuel costs up 47 percent.

(Reporting by Steven Scheer; Editing by Mike Nesbit)

• A Permanent Economic Emergency