Login to ttyS0 under zLinux SELinux gives permission denied

Issue

Running RHEL6 under zVM6.2. We are testing a terminal server (Fawkes) and a target (Rescue) using iucvtty. We use Startup program on Rescue like:

cat ttyS0.conf
# This service maintains a getty on /dev/ttyS0.

start on stopped rc RUNLEVEL=[2345]
stop on starting runlevel [016]

respawn
exec /usr/bin/iucvtty ttyS0

It sort of works. Taking the default login program the logins fail with:

login: bobby
Password:
Last login: Thu Jun 13 08:18:54 on pts/3
login: no shell: Permission denied.

auditlog shows:

type=AVC msg=audit(1371123492.505:46): avc:  denied  { transition } for
pid=2183 comm="login" path="/bin/bash" dev=dm-0 ino=10584
scontext=system_u:system_r:local_login_t:s0
tcontext=unconfined_u:unconfined_r:unconfined_t:s0-s0:c0.c1023
tclass=process