*

Union rejects binding arbitration, seeks negotiated

settlement

*

Air Canada ( ACDVF ) warns of potential flight disruptions

*

Flight attendants could strike as early as August 16

*

Canadian minister Patty Hajdu said she is closely

monitoring the

situation

(Adds details from Canadian minister in paragraphs 3 and 4)

By Allison Lampert and Rajesh Kumar Singh

MONTREAL/CHICAGO, Aug 12 (Reuters) - Air Canada ( ACDVF )

said on Tuesday it has asked for federal government intervention

in contract talks with its flight attendants union, after the

airline declared an impasse in the negotiations.

The company also warned of potential flight disruptions,

saying it had made arrangements with other Canadian and foreign

carriers to provide customers alternative travel options.

Patty Hajdu, Canada's Minister of Jobs and Families, said

later in the day that she had met with both the union and Air

Canada ( ACDVF ), and was closely monitoring the situation.

"I ... encourage both parties to remain at the table until a

deal is reached," Hajdu said, adding that federal mediators

would remain available until an agreement is finalized.

The standoff in contract negotiations have raised the risk

of disrupted service as early as Saturday by Air Canada ( ACDVF ) and Air

Canada Rouge, which together carry about 130,000 customers a

day.

Earlier in the day, the Canadian Union of Public Employees,

which represents more than 10,000 flight attendants, rejected

the airline's proposal for binding arbitration, arguing it wants

a negotiated settlement.

The airline said it had offered a 38% increase in total

compensation for flight attendants over four years, with a 25%

raise in the first year.

Its offer also addressed the issue of ground pay and

improved pensions and benefits, among other advantages.

But the union said the offer would raise actual wages by

17.2% over four years and was "below inflation, below market

value, below minimum wage - and still leaves flight attendants

unpaid for all hours of work."

Most carriers have paid cabin crew members only when planes

are in motion. But in their latest contract negotiations, flight

attendants in North America have sought compensation for hours

worked, including for tasks like boarding passengers and waiting

around the airport before and between flights.

The union said Air Canada ( ACDVF ) had offered to begin compensating

flight attendants for some unpaid work but only at 50% of their

hourly rate.

Flight attendants could strike as early as August 16, after

giving 72 hours notice.

Air Canada ( ACDVF ) said it believed the talks were at an impasse,

accusing the union of "insisting on unsustainable wage

increases."

POTENTIAL FLIGHT DISRUPTIONS

Canada's labor code empowers the government to direct both

parties to binding interest arbitration to avoid massive

economic disruptions. There are precedents for government

intervention in the transportation sector.

TD Cowen analyst Tom Fitzgerald said the situation would

likely prompt the government to intervene.

"We find it hard to fathom that Canada's government would

want to sit back and allow this level of disruption to happen to

its economy and the traveling public during the peak summer

season," Fitzgerald said.