SFGate: Brazil Nixes Varig Plan to Suspend Flights

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Friday, July 21, 2006 (AP)
Brazil Nixes Varig Plan to Suspend Flights



   (07-21) 14:13 PDT RIO DE JANEIRO, Brazil (AP) --

   The Civil Aeronautics Agency on Friday vetoed a plan by Brazil's
struggling airline Varig to suspend most flights and ordered the company
to fly all its assigned routes.

   Viacao Aerea Rio-Grandense SA, or Varig, must fly its five assigned
national routes and five international routes, Agency President Milton
Zuanazz told the government news service Agencia Brasil.

   The struggling airline is having trouble paying for landing and departure
fees and fuel for its jets. More than two-thirds of its planes are
grounded as leasing companies demand their craft back and the company
cannot pay for basic maintenance.

   Varig, which was sold Thursday to its former subsidiary VarigLog, had
announced that it was temporarily suspending all flights except for the
lucrative shuttle between Rio de Janeiro and Sao Paulo.

   VarigLog said late Thursday it would cancel its international flights and
most domestic routes until July 28 but would increase the number of
shuttles on the Rio-Sao Paulo route from 10 to 36 a week.

   Varig said on its Web site that passengers with tickets for canceled
flights will be transferred to other airlines and that the reduction in
flights was part of a strategy to "rapidly resume growth and increase
profitability."

   VarigLog, controlled by the investor group Volo do Brasil, bought Varig =
at
an auction Thursday for nearly $500 million, rescuing the airline from
liquidation.

   Varig will operate at first with just 13 planes but hopes to increase its
fleet to 80 planes within six months, Volo do Brasil said.

   Varig has been in financial trouble for years, with debts of around 8
billion Brazilian reals ($3.6 billion).

   Long Brazil's leading airline, Varig has fallen behind TAM SA and Gol
Linhas Aereas Inteligentes on the domestic market. ------------------------=
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Copyright 2006 AP

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