MANILA, March 26, 2011 (AFP) – National flag-carrier Philippine Airlines has won government approval to hive off some units to cut costs, but the staff must get higher severance pay, President Benigno Aquino’s chief aide said Saturday.

The government ruling gives the struggling company a free hand to farm out its in-flight catering, airport services and call center reservations to other companies, to cut its long-terms costs.

However the government also ordered PAL to pay a severance pay equivalent to 125 percent of the affected employees’ monthly salaries for each month they were employed, up from the 25 percent that the airline had originally offered.

The Aquino government forced PAL and its ground crew staff to submit to government arbitration late last year after the the union rejected the company’s severance offer to 2,600 affected workers.

“In light of this development, we are issuing a ruling which takes into consideration the welfare of the workers involved in accordance with labor laws and regulations,” Executive Secretary Paquito Ochoa said in his ruling.

Neither side could be reached for comment Saturday.

PAL had said in November it expected to be hit with a bill of almost 60 million dollars in severance payments to staff when it farms out ground crew work.

After incurring a combined 312 million dollars in net losses in its two fiscal years to March 2010, PAL had said spinning off the ground services would help the airline save the jobs of the remaining 4,000-plus staff.