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The Israeli government approved an Open Skies deal with European carriers on Sunday, as local airline workers went on strike with hundreds burning tyres outside the premier's office in protest against the plan.
"The goal of the reform we approved today is to reduce the costs of flights to and from Israel and to increase incoming tourism," Prime Minister Benjamin Netanyahu said in a statement, saying the deal had been in the works for "many years."
"We will continue to advance reforms to reduce the cost of living and increase the efficiency of services to Israelis," he said.
Netanyahu said the finance and tourism ministers would have 45 days to address questions raised during the discussion which took place before the deal was approved by the cabinet.
Israel's three airlines -- El Al, Arkia and Israir -- are bitterly opposed to the deal, saying it would result in widespread layoffs.
"Implementing the Open Skies agreement in its current format will have severe ramifications which would fatally and irreversibly harm civilian aviation in Israel," Histadrut trade union chairman Ofer Eini said in a letter to Netanyahu.
Staff of El Al and charter firms Arkia and Israir stopped work at 5:00 am (0200 GMT) on Sunday but did not say how long the stoppage would last.
As ministers arrived for the weekly cabinet meeting, more than 500 angry demonstrators burst through the security barriers and tried to block their way into Netanyahu's office, police and an AFP correspondent said.
"Demonstrators broke down barriers and headed to a closed area near the prime minister's office," police spokesman Micky Rosenfeld told AFP, saying eight people had been arrested.
Several tyres were set alight, sparking heated scuffles with the police and riot police who were called to the scene, the correspondent said.
Waving Israeli flags and banners demanding "Aerial justice," they handed out flyers saying: "Israel's skies are shutting out Israeli airlines."
"International airlines that don't add Israel to their (airline) alliances because of the Arab boycott are about to take over Israeli skies," it said, warning the deal "does not allow Israeli airlines to compete equally with European airlines".
El Al, Israel's national carrier, has since 2005 been under private ownership.
In March 2012, Israel and the European Union signed an Open Skies aviation agreement aimed at opening up and integrating their markets.
In line with the deal, European Union airlines will be able to operate direct flights to Israel without current limitations, and Israeli carriers will also have more freedom to fly to airports across the EU, in a move that will reduce costs for travellers.