Israel reached an agreement with airline El Al on Monday to help cover its security costs, which ended a two-day strike and will help the flag carrier be competitive in an open-skies deal with Europe.
Flights at El Al and two smaller airlines were grounded for a second day as workers protested against the open-skies deal with Europe, which was approved by the cabinet on Sunday and which they feared could cost them their jobs.
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Nearly 50 El Al flights from Tel Aviv were canceled on Monday, affecting some 15,000 passengers, although the airline's union did allow three special flights to take off.
An El Al spokeswoman said flights would resume at 23:30 local time (2030 GMT).
Since the start of talks on the open-skies deal three years ago, Israeli carriers and their workers' unions have been concerned about the steep security costs Israeli airlines must pay, which their competitors overseas do not.
The government currently pays 70 percent of Israeli airlines' security costs and had agreed to raise it to 80 percent, but the airline did not deem that enough. El Al itself paid $33 million for security in 2012.
The Finance Ministry said it had reached an agreement on security issues with El Al but did not provide details. The Histadrut, Israel's main labour federation, said the state would finance 97.5 percent of Israeli airlines' security costs.
"Too bad it took two days of strike and damage to hundreds of thousands of citizens to reach an agreement that could have been done last Friday," the Histadrut said.
The airline's shares rebounded 2.5 percent on Monday after sliding 8.5 percent on Sunday.
Workers at El Al and smaller rivals Arkia and Israir had started an open-ended strike at 5 a.m. (0200 GMT) on Sunday in protest over the cabinet's decision to ratify the open skies deal, which will relax restrictions and quotas on flights between Israel and the European Union.
Supporters of the agreement, which goes into effect next April, say it will increase competition and help Israel's tourism and economy.
Israel's Manufacturers' Association, concerned over the impact the strike would have on foreign trade, had urged the labour court to step in and order airline employees back to work.
Without a deal with El Al, the Histadrut was set to shut Ben-Gurion International Airport, Israel's main airport, to all incoming and outgoing flights on Tuesday at 5 a.m. (0200 GMT) for four hours.
"Open skies is a done deal," Finance Minister Yair Lapid said. "It's a good agreement for Israel's citizens, the economy and tourism."
To help airlines prepare for the increase in competition, the agreement will be gradually phased in over the next five years.
Earlier in the day, El Al Chief Executive Elyezer Shkedy said he had repeatedly appealed to the Israeli government "to act immediately to put in order the various issues that will enable fair and equal competition and above all the government's full participation in security costs for Israeli airlines".
(Editing by Mike Collett-White and Jane Baird)