He added that the Government had to act swiftly or risk the airline losing hundreds of millions of dollars if the two parties failed to come to agreement again.

SM Lee was referring to the current spotlight on relations between SIA and its pilots union Alpa-S. Despite a mediated settlement on a protracted wage dispute earlier this year, Alpa-S ousted its leadership last month, a move that has drawn heavy criticism from Government ministers.

The Prime Ministers office also said on Sunday that it would be amending the Trade Unions Act to allow the executive council of Alpa-S to sign collective agreements without the ratification of its general membership.

Two non-citizens on the executive council have also had their approval to sit on the council rescinded by the Ministry of Manpower.

Commenting on the Government's action at the Global Brand Forum yesterday, SM Lee said that when trouble was brewing, the Government had two options -- to do nothing and hope the situation resolves itself or move in early to avoid severe consequences.

Said Mr Lee: "This is a service industry. You have stewards or stewardess or pilots playing work-to-rule, you lose that cache. So we are telling them, both management and unions, you play this game there are going to be broken heads, let's stop it.

"They know what this is all about, we are not fools, we know what the management knows, we know the union side too, we have got unionists on our side and we are going to solve this before it gets troublesome, solve it we will.

"If we sit back and do nothing and allow this to escalate and test the wills, then it is going to lose hundreds of millions of dollars in one, two, three months. We are not going to have that."

Meanwhile, in a statement to the media, SIA said that it would work with the unions towards a more flexible wage structure with a larger variable portion related to company profits.

Explaining in more detail the pact made in June following the aftermath of Sars, SIA said that there would be a progressive return of pay cuts once the group profit for the current financial year reaches the S$200 million threshold.

The agreement reached with Alpa-S and four other NTUC-affiliated SIA unions also allows for 115 per cent of the wage cut to be paid ex gratia once the group's profit level reaches S$600 million — the target that NTUC labour chief and SIA board director, Mr Lim Boon Heng, had warned that pilots could be jeopardising.

Said an SIA spokesperson, "It is in the interests of all staff to work towards achieving this target as the ex gratia payment will then be more than the wage cuts."

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