Israeli national carrier El Al has revealed plans to establish its own low-cost division as it prepares for increasing competition from European budget rivals following the Open Skies agreement initiated by the Israeli Ministry of Transport earlier this year to boost connectivity and visitor numbers into the country. The new carrier, called ‘Up’, will initially operate with five Boeing 737-800s serving markets across Europe from summer 2014.

Speaking at a press conference revealing the new carrier, El Al chief executive officer, Elyezer Shkedy explained that the new brand would allow customers to choose how they fly and what amenities they pay for and would allow the business to better compete with rivals (The executive subsequently resigned from his position just days after the announcement but it is not clear of the motives behind his departure).

"This is another step in to compete in the world of aviation. We are responding to low-cost airlines which have been flying intensively to Israel lately. This will improve our ability to cope, increases the number of our customers and the number of our seats. It's a step that will enable us to meet challenges in a new way," he said.

Up will launch operations on March 30, 2014 and will fly between Tel Aviv’s Ben Gurion International Airport and Berlin, Budapest, Kiev, Larnaca and Prague with up to eleven weekly flights to the capital cities and six weekly flights to Larnaca in Cyprus. Further network growth is being discussed. Its 737-800s will be configured in a two-class arrangement: Tourist Plus with 36 seats with a 34 inch between seats, and complimentary food, beverages, a blanket and pillow; and Tourist with 144 seats with a 30 inch pitch and paid for frills.

A major factor in the formation of Up is that the carrier will be able to serve markets that El Al would not necessarily be able to serve sustainably with its own business model. The airline has approached the Israeli Transportation Minister for recognition of Up as a low-cost carrier, which will qualify it for the lower airport tax rates paid by the foreign discount airlines that make use of the old Terminal 1 building at Ben Gurion.

El Al and Israel's other carriers had fought stronly against the new open skies agreement between Israel and Europe but this decision by the national carrier suggests they are now udapting their strategies to better compete. Israel’s Tourism Ministry has been quoted as saying the agreement could boost tourism to the country by 250,000 tourists in 2014, creating 10,000 new jobs.

All five initial Up destinations are currently served by El Al, while Travel Service Hungary and Wizz Air serve the Budapest route; Ukraine International Airlines the Kiev market; Czech Airlines and Smartwings link Tel Aviv to the Czech capital Prague; Cyprus Airways and Arkia serve Larnaca and airberlin, Israir and Lufthansa fly to Berlin, a route which will also be served by easyJet from next year.