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UPDATE 1-Pilots at Ryanair's largest base reject pay offer

* London Stansted pilots reject deal by 60 pct to 40 pct

* Ryanair says will seek to address concerns

* Pilots' association expects other bases to follow suit (Adds detail, quotes)

DUBLIN, Oct 20 (Reuters) - A majority of Ryanair pilots at its largest base have rejected management's offer of improved pay and conditions, the airline said on Friday, dealing a blow to its efforts to address a recent pilot shortage.

Europe's largest airline by passenger numbers sparked outrage in recent weeks by cancelling about 20,000 flights after admitting it did not have enough standby pilots to operate its schedule without significant delays.

It responded by promising pilots significant improvements in pay and conditions, exceeding rates paid by rivals, with negotiations to take place with each of its 86 bases individually.

Pilots at London's Stansted Airport rejected the Ryanair offer by a margin of 60 percent to 40 percent at Friday evening's vote, the Irish airline said.

"Ryanair will continue to engage with the London Stansted ERC (Employee Relations Council) to understand how it can address their remaining concerns, especially as it will be recruiting new pilots in Stansted from November at these higher pay rates," it said in a statement.

Two Ryanair pilots with knowledge of the vote told Reuters that the turnout was above 90 percent.

The deal included a pay increase for all grades of pilots of about 20 percent and improvements in conditions, two separate sources told Reuters.

Ryanair said in its statement that it would lift captain salaries to 20 percent more than those offered by rival Norwegian Air Shuttle.

'PRODUCTIVITY BONUS'

A significant portion of the increase is by way of a "productivity bonus" of between 500 euros and 1,000 euros a month on condition that pilots make themselves available to work three extra days in November and three in December, according to a copy of the letter to pilots that was seen by Reuters.

The bonus also requires pilots to deal directly with the company through the ERC at Stansted. Ryanair does not recognise unions and instead agrees conditions with pilots through ERCs.

A number of pilots who have been organising on social media in recent weeks to use the pilot shortage to press for better conditions have demanded a new independent and pan-European representative body.

Ryanair has rejected criticism of its ERC system. A 2007 Irish Supreme Court ruling rejected arguments by pilots that the ERC system did not constitute genuine collective bargaining.

Organisers pushing for pan-European unionisation have told pilots that more than 30 bases have rejected the deal so far, a number of pilots have told Reuters.

A Ryanair spokesman said that figures was untrue and that more than 10 other bases had agreed new pay deals, with the majority of bases yet to vote. He would not provide a breakdown of how many had accepted or rejected deals so far.

"Based on what we have been hearing from Ryanair pilots, this is not a surprise," said British Airline Pilots' Association General Secretary Brian Strutton.

"Stansted is the critical base for Ryanair and I think other bases will now also reject." (Additional reporting by Conor Humphries and Alistair Smout in London; Editing by David Goodman)