El Al Israel Airlines posted a second-quarter net loss of USD$15.1 million on Thursday, compared with a year-earlier net profit of USD$29.9 million, as high fuel costs weighed on its bottom line.

Revenues rose 2 percent to USD$429.2 million, reflecting growth in prestige-class passengers, the airline said.

Nissim Malki, vice president of finance, said El Al had to face complex challenges in the quarter.

"Regarding revenues, we had to face the huge increase in seats offered by foreign carriers, while as to expenditure, we faced the continued increases in production input, and first and foremost fuel -- the company's main production expense," he said in a statement.

Earlier this year, foreign carriers, mostly European, have sharply boosted capacity on routes to Tel Aviv, while Delta Air Lines began offering non-stop daily flights to and from Atlanta to compete with El Al's lucrative US business.

Last month, El Al said it expected to make a loss in 2006 due to record high fuel costs and the fighting between Israel and Hizbollah, which broke out in July and ended on Monday.

El Al said that even after hedging, high fuel costs increased its quarterly expenses by USD$21.3 million. The dollar's weakness against major currencies resulted in another USD$12 million expense, it said.

El Al also said that Chief Executive Officer Haim Romano's term has been extended until the end of 2010.

Romano said in a statement that El Al maintained a load factor of 80 percent despite the "deterioration of market conditions and the stiff business competition".

He said that foreign carriers increased seat capacity by 29 percent while passenger traffic through Ben Gurion Airport rose 9 percent.

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