Singapore Airlines Ltd, which had operating losses in April and May, plans to cut its pilots' pay for the second time in slightly more than a year to help pare costs.
The pilots will have a pay cut of as much as 16.5 percent, take as many as two days unpaid leave a month and receive a one-time payment as compensation, Loh Meng See, Singapore Air's senior vice president of human resources, said in court.
The carrier's accord with the Airline Pilots Association of Singapore, which represents 1,600 pilots, concludes some two months of negotiations.
The decision may help the carrier, which employs about 30,000 people, win wage cut agreements from other unions as it wants to lower labor costs by at least S$200 million (US$114 million) annually. The SARS outbreak led to a slump in travel demand, which left its planes half empty and prompted Asian airlines to cut more than 1,150 weekly flights.
"They struck a middle ground and it will be easier now for the rest of the unions to follow on from here," said Teo Hiang Boon, an analyst at G.K. Goh Research Pte.
The wage cuts will take effect this month and last until next March. The court will convene again on Saturday to decide whether to accept yesterday's preliminary agreement.
Singapore Air also cut its employees' wages in February last year after travel demand fell because of the terrorist attacks on the US in 2001.
The carrier has told the pilots' union that even with the wage cuts, more jobs may be lost, said P. James, vice president of industrial relations for the pilots union.
Singapore Air fired 414 workers in the middle of last month, the biggest round of job cuts since its founding in 1972.
``The outbreak of SARS, which was preceded by the Iraqi war and the global economic slowdown, has adversely affected our business,'' Loh said in Singapore's Industrial Arbitration Court. ``There is therefore an urgent need for the company to take measures to reduce costs to ensure its long-term viability and competitiveness.''
Under the agreement, Singapore Air will return a quarter of the pilots' wage cuts if the company earns S$200 million net profit. The pilots will get 115 percent of their wage cut if earnings reach S$600 million.
``Nobody likes their pay to be cut, but this is something that we have to do,'' James said.
Singapore Air's chief executive officer Chew Choon Seng helped secure the one-off compensation, he said.
The carrier originally wanted workers to take a pay cut of as much as 22.5 percent and as many as 12 days unpaid leave every two months. It had offered its pilots a one-off payment matching their wage cuts for the fiscal year ending next March, if the company earns more than S$700 million.
The pilots had countered with a proposal for a wage cut of as much as 12 percent and the compensation payment if the company earns more than S$350 million.
Singapore Air may not reach its S$200 million savings target given the lower wage-cut agreement, Teo said.
The airline, which has been profitable since going public in 1985, had a total operating loss of S$370 million in April and May.
Singapore Air has cut about a third of its capacity because of the disease and is now selling cheaper tickets to lure travelers. It filled 53.1 percent of seats with paying passengers in May, down from 72 percent a year earlier.