Quite the firestorm I started on the main site 
I agree w/ the thrust of the article, but I think you were a bit sloppy on a few points.
"Tourism in Israel lags far behind where it should be due to the high cost of flying there. Inviting more competition will drive down the cost of airfare and increase the number of tourists, who spend lots of money while in Israel propping up the entire economy."While it may lag behind where it 'should be' (although I'm not sure how you define that), they've had record tourists each of the last 2 years, and it's been steadily climbing. Right now, the lack of hotel space is a bigger problem.
"All their whining about keeping a national carrier afloat is malarkey, what they really want to do is keep their overpaid salaries afloat."I agree that their salaries are likely overpaid, but what do you have to back it up? How do they compare to the salaries at other airlines? (See this article about redundancies or workers.
http://www.globes.co.il/serveen/globes/docview.asp?did=1000837839&fid=4111)
"I don’t know of any Israeli companies that compete based on service."Seeing as Israel's strongest suit is its exports, I'd assume that plenty of external firms are happy with their service. In the tourist and consumer goods areas you may be correct though. Although, it's a bit of a strong statement coming from s/o not living here, but it certainly is our reputation.
"Mileage programs are massive profit centers for airlines... And yet El Al doesn’t even try to compete for these dollars!"It is a shame that LY doesn't compete for this, but there may be hope. According to ppl at the FT DO w/ LY b/f Pesach, they may be coming out with a new cc agreement, or s/t of the sort.
Although, I'm not sure why cc companies would want to deal with them, seeing as they represent such a small market.
"2. Making customer friendly moves like the elimination of mileage expiration and fuel surcharges."Unfortunately, when I asked them this, they seemed to be happy to keep the European model. Maybe that's who they think they're competing with.
"As far as I know this is only an issue now in business class between TLV and the far east."
Still wish you would've brought it up, unless you don't want the great value to be publicized.
"Turkey has a tourism industry that is orders of magnitude greater than Israel’s."I tried finding stats on tourism as a % of gdp for both countries, but wasn't successful in my few minute search. Nonetheless, I'd doubt that it's higher than Israel's in terms of its effect on gdp.
"From a frum perspective the answer is that Gd pays us back multifold, but El Al isn’t doing it to be frum, they’re doing it because it’s a good business decision.
They make more money because they don’t fly on shabbos than if they did fly on shabbos and lost a large segment of the flying population in Israel."I don't think this is their decision only. These things have much deeper political ramifications, and LY wouldn't be able to change it by themselves.
Plus, it's not one day a week. Since flights can't land either, it's closer to 36 hours of not working. And unlike frum stores, they're competing for a global audience that has certain needs. (And there's a reason that so many frum owned places find heterim for why their biz or website is allowed to operate on shabbos...)
And I don't think they'd lose a 'large segment' of the flying community. When you look at the % of frum ppl in Israel (and among all tourists), and consider the fact that many of them would continue to fly LY regardless, the loss would exist, but not as strong as you make it out to be. (Although I'm not at all advocating for them to start flying on shabbos.)
Anyhow, they already are mechallel shabbos. Check out the recent Haaretz article on this.
Either way, it was refreshing to see you shake things up, and LY definitely needs to change. (Although I can't imaging an alliance ever accepting them).
For those interested, there are many discussions on FT about what LY can do to change, including many interesting suggestions by a guy name ELY001 who claims that he wants to buy them out.
Chk out this thread, along w/ many others in the LY forum.
http://www.flyertalk.com/forum/el-al-matmid/1459465-el-al-arkia-israir-strike-over-open-skies-approval.html