Government to mediate Philippine Air labour dispute

MANILA Oct 6 (Reuters) - The Philippine government will mediate a dispute between flag carrier Philippines Airlines (PAL) (PAL.PS) and flight attendants to head off a strike that could undermine its plans to make tourism a driver of economic growth.

Talks between PAL management and the flight attendants' union over pay and conditions broke down on Tuesday. The union had threatened to strike, but cannot after Labor Secretary Rosalinda Baldoz said the government would oversee compulsory arbitration.

The dispute comes nearly two months after some of the airline's pilots stopped reporting for work, causing days of flight disruptions across the country.

President Benigno Aquino had said then an "open skies" policy of allowing in more foreign carriers was one option if labour disputes continued to hobble the tourism sector and economy.

"We're still hoping that this can be resolved and that we don't go into the open skies policy, because it's still being studied completely," Aquino said on Tuesday.

"But let us not think that very soon PAL will go on strike, it's not like that at all," said Aquino, who wants to double tourist arrivals to 6 million a year by the end of his term in 2016.

Safety concerns are also a problem for the industry. In March, the European Union banned Philippine airlines from flying to the 27-country bloc after the U.S. Federal Aviation Authority had downgraded the country's safety ratings. [ID:nLDE62T1WX]

Baldoz said in a radio interview the government was unlikely to take over operations of PAL, which is owned by Lucio Tan, one of the country's richest men. Only 2 percent of the company's stock is considered a free float available for trading.

Despite a wealth of stunning beaches and natural attractions across its more than 7,000 islands, the Philippines' annual tourist arrivals of about 3 million lag Thailand's 14 million, Malaysia's 24 million and Singapore's 8.7 million.

Philippine Airlines flies to 33 foreign cities, mostly in Asia-Pacific, and 29 domestic points. (Reporting by Rosemarie Francisco; Editing by John Mair and Sugita Katyal)