El Al Israel Airlines expects to make a loss in 2006 due to record high fuel costs and the fighting between Israel and Hizbollah.

"The company does not have a clear forecast as to the amount, especially because of the uncertainty regarding the security situation and its consequences," the airline said in a statement on Wednesday.

Last year El Al posted a 94 percent rise in net profit to USD$64.1 million on revenues of USD$1.62 billion.

Israel is determined to drive Hizbollah from the south of Lebanon to halt the firing of rockets by the Islamic militant group at Israeli cities. The two sides have been fighting for eight days.

El Al said market conditions and the competitive business landscape in which the company operates had worsened.

It also said that some or all of its forecasts regarding the various factors that affect its results might not hold.

Its financial results could also be affected by the entry of new players in the market and the addition of new flights by airlines currently serving the market.

El Al holds a market share of about 48 percent in Israel. The company has recently started to face more competition from Delta Air Lines, which operates daily nonstop flights from Atlanta to Tel Aviv.

The entry of low-cost airlines in the market could result in declining fares, which could hit El Al, it said.

El Al also noted that it has high security expenses and any change in these costs because of circumstances or due to a government decision would have an impact on its results.