Pilots at Singapore's Silk Air have agreed to pay rises tied to variable components such as productivity, a union said on Friday, accelerating controversial plans to introduce flexible wages.

Total pay for Silk Air's 90 pilots will rise under the new three-year collective agreement with captains receiving a basic salary of SGD$7,050 (USD$4,135) per month, up from SGD$5,900 in 2003 when wages were cut 16 percent during an outbreak of SARS.

Much of the pay increase comes from variable components such as a productivity allowance, or the rate paid for every hour flown, for the pilots, who form the SilkAir chapter of the Air Line Pilots Association of Singapore (ALPA-S)

The agreement was signed on July 13, ALPA-S said.

Facing new competition from rival Asian economies, Singapore is promoting a flexible wage system to make it easier for companies to reduce salaries in tough times to preserve jobs.

"The terms in this collective agreement ensure that Silk Air pilots earn competitive rates and boosts staff morale. At the same time, it allows the company a lot of flexibility to maneuver according to the prevailing business environment," said Captain Ajmer Singh, chairman of Silk Air's ALPA-S branch.

Deputy Prime Minister Lee Hsien Loong, due to become premier this year, said in January that half of Singapore's workforce in large firms should be on variable wages by year-end, with around 30 percent of a worker's pay tied to their employer's fortunes.

The new system of flexible pay -- more typically used for executives elsewhere -- marks the biggest reform to Singapore's wages system since the nation's first recession in 1985.

The Silk Air agreement, whose variable component represents about 35 percent of each pilot's total salary package, expires at the end of March, 2007, ALPA-S said.

Singapore Airlines' pilots ousted its union's leaders last year after the airline reported a strong return to profit in the months immediately following cuts in wages and jobs.

Singapore Airlines, 57 percent government-owned, slashed capacity by a third in response to last year's outbreak of Severe Acute Respiratory Syndrome, cut wages and axed nearly 600 staff.

Wages of top management were cut by 20 percent. Those of pilots and senior management staff were reduced 16.5 percent.

The flag carrier, traditionally one of the world's most profitable airlines, bounced back from last year's SARS-induced downturn in travel, earning a net profit of SGD$849.3 million (USD$499 million) in the 12 months to March, 2004, down from SGD$1.06 billion (USD$623 million) in 2003.

(Reuters)