By Steven Scheer

JERUSALEM (Reuters) - Flights at Israeli flag carrier El Al and two smaller airlines remained grounded for a second straight day on Monday due to a strike by workers protesting against a new open skies deal with Europe which they fear could cost them their jobs.

Nearly 50 El Al flights from Tel Aviv were cancelled on Monday, affecting some 15,000 passengers, although the airline's union did allow three flights to take off.

Israel's Manufacturers' Association, concerned over the impact the strike will have on foreign trade, urged the labor court to step in and order airline employees back to work. The court was expected to hear arguments later on Monday.

The Histadrut labor federation said it would 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.

"There is no deadline for the strike to end," said Dafna Cohen-Nouriel, the Histadrut's spokeswoman.

Workers at El Al and smaller rivals Arkia and Israir started an open-ended strike at 5 a.m. (0200 GMT) on Sunday in protest over the cabinet's decision on Sunday to ratify an open skies aviation deal with Europe.

Supporters of the agreement - which goes into effect next April - say its relaxation of restrictions and quotas on flights between Israel and European Union countries will increase competition and help Israel's tourism and economy.

To help airlines prepare for the rise in competition, the agreement will be gradually phased in over the next five years.

Finance Minister Yair Lapid said he had instructed his staff to come up with a solution that would help Israeli airlines adjust to the new reality of open skies.

"Open skies is a done deal," he said. "It's a good agreement for Israel's citizens, the economy and tourism ... This strike has been unnecessary from the start and it still is."

But Israeli carriers and their workers' unions have concerns, mainly over steep security costs Israeli airlines pay which their competitors overseas do not.

The government pays 70 percent of Israeli airlines' security costs and will raise it to 80 percent, but that was not deemed enough. El Al paid $33 million for security in 2012.

"We appealed and are appealing 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," said Elyezer Shkedy, El Al's chief executive.

Cohen-Nouriel said that if Israeli carriers had to pay their security costs, El Al, Arkia and Israir's airfares would remain higher than competitors and could lead to their demise.

El Al's shares rebounded 2.5 percent on Monday after sliding 8.5 percent on Sunday.

(Editing by Mike Collett-White)