KINGSTON, Jamaica (AP) -- Air Jamaica pilots agreed to a 5.6 percent pay cut Thursday, settling a heated contract dispute with management that had threatened the troubled national carrier's financial recovery and caused the government to intervene.
After months of bitter wrangling, the 180 pilots also agreed to cuts in a range of employee benefits, including meal allowances and overtime pay, the state-run airline said in a statement.
Air Jamaica Chairman Vin Lawrence declined to say how much the airline would save under the deal, but estimates put the pilots' current salaries at nearly one-third of Air Jamaica's $100 million yearly employee wage bill.
The agreement gives the beleaguered airline much-needed thrust in its bid to cut costs amid massive losses caused by higher fuel and security costs and a drop in passengers following the 2001 terror attacks in the United States.
The pilots had accepted that salary reductions were necessary but bitterly fought cuts to benefits. The pilots' union representatives weren't immediately available for comment.
The labor dispute boiled over earlier this week when the pilots abruptly broke off contract talks, saying they had learned that Air Jamaica planned to lay them all off and hire replacements at lower salaries.
Prime Minister P.J. Patterson quickly intervened and pressured all sides to agree to a contract during two days of emergency talks.
Air Jamaica officials refused to confirm or deny that they had planned the dismissals.
The government regained control of Air Jamaica in December and appointed a new board. It originally planned to sell the airline but later said restructuring would keep it in government hands for several years.
Air Jamaica flies to 11 U.S. cities, and operates a codeshare agreement on many flights with Delta Air Lines. It is the Caribbean's largest regional airline.