South American Airlines Face Bumpy Ride Amid Legal Woes
15 October 2004
Dow Jones International News
By Amy Guthrie

MEXICO CITY (Dow Jones)--Political and legal hurdles are taking some major South American airlines on a bumpy ride.

Government interventions, foreign ownership limits and precarious financial situations have major carriers reeling in Peru, Brazil and Colombia.

This week, the Peruvian government suspended Chilean carrier Lan Airlines SA's (LFL) flying permit for failing to meet local ownership requirements. The order affects both national and international flights for Lan's local unit, LanPeru, which is the Andean nation's second-largest airline.

Lan owns 49% of LanPeru, while another 21% is owned by a separate Lan-controlled company. LanPeru President Emilio Rodriguez-Larrain, who owns the rest of the carrier, called the flight suspension "regrettable."

"We are confident that this decision will be overturned in light of our arguments and the evidence that we have presented," Rodriguez-Larrain told journalists Thursday.

LanPeru runs 11 national flights and 11 international flights a day, and shoulders about 35% of Peru's cargo market. The Peruvian government declared a state of emergency earlier this week in the airline industry, which will allow other airline companies to lease aircraft in order to offer more flights.

"This is the risk of working in Latin America. Sometimes the rules aren't clear," said Gavin Templeton, an analyst who covers Lan for IM Trust in Santiago.

Templeton is confident that Lan will get over the hurdle in Peru and work around other difficulties that might pop up in the future. Lan has 52 passenger aircraft and seven dedicated freighters, making it one of the biggest and most profitable carriers in Latin America, with net income of $137.7 million for the 12 months ending in June.

The skies aren't so clear, though, for Brazilian carrier Vasp, which appears to be slowly fading away. The airline, founded in 1933, doesn't have enough liquidity to cover basic expenses and has seen its market share shrink in recent years to 8.5%. The company is currently operating on a six-month emergency license granted by the government, pending presentation of a comprehensive debt plan.

Flagship operator Varig, which serves about 30% of the Brazilian market, is also facing some turbulent times. Varig has reduced its fleet size at an alarming rate, prompting analysts to predict that the Brazilian government will step in to save the carrier.

"If Varig goes away, Brazil would have a major crisis," said an analyst at a Wall Street firm who declined to be named.

Varig runs more than 80% of Brazil's international routes, making the possibility of it folding a potential disaster. Government assistance, though, may not come until Vasp is out of the picture, warned the Wall Street analyst, so as to avoid having to prop up Vasp as well.

Observers are somewhat more optimistic about prospects for Colombian carrier Avianca, which is being courted by several investors and is expected to emerge from bankruptcy protection later this year.

Bob Booth, chairman of Aviation Management Services, a Miami consulting firm, is pulling for the offer from Sinergy, which proposed in March pumping $64 million into Avianca and assuming nearly $300 million of the company's debt in return for a 75% stake in the world's second-oldest airline.

Synergy is owned by Brazilian oil magnate German Efromovich, who also controls OceanAir, an air taxi company that serves Brazil's oil industry and operates regional routes serving more than 30 cities. A Synergy purchase could bring Avianca into the Brazilian market.

The other offer on the table for Avianca comes from an unnamed Arab investor who has approached the Colombian pilots union. Ultimately, Avianca's fate will be decided by Manhattan bankruptcy Judge Allan L. Gropper.

-By Amy Guthrie, Dow Jones Newswires; (5255) 5080-3453; amy.guthrie@dowjones.com

(Robert Kozak in Lima and Diana Delgado in Bogota contributed to this report) [ 15-10-04 1135GMT ]

Brazil's low-cost Gol airline adding Bolivia as second international destination
21 January 2005

SAO PAULO, Brazil (AP) - A month after starting its first international flights to Argentina, Brazil's Gol airline announced Friday that it will soon add service to Bolivia.

The low-cost carrier, whose full name is Gol Linhas Aereas Inteligentes SA, said it has received government authorization to operate regular flights to Santa Cruz de La Sierra in Bolivia. Flights should begin by June.

"Gol's successful operations in Argentina have proven that there is an opportunity to expand our business throughout South America," Gol marketing and service vice president Tarcisio Gargioni said in statement.

Chief executive Constantino de Oliveira Jr. said recently that he expects to secure 70,000 passengers a year for the company's route between Sao Paulo and Buenos Aires, Argentina.

The airline market in South America's largest country is benefiting from a resurgent Brazilian economy. Brazil's economy grew by more than 5 percent in 2004 and is expected to grow by at least 3.5 percent this year.

Gol started flying in 2001 and is now Brazil's third-largest airline after Viacao Aerea Rio-Grandense SA, known as Varig, and TAM Linhas Aereas SA.

The problem with air companies over here in South America is that their tickets are ULTRA expensive. Mind you, last week I was just checking some fare prices in Expedia and I discovered that a NYC - London return ticket costs 340 dollars! That's a 7 hour flight, in South America a Sao Paulo - Buenos Aires ticket costs the same, and it's a 2:30 hour flight!

Varig has been in a bad situation for years and they have already received aid from the government. VASP is almost folding, they have cancelled all their flights for this week and they intend to cancel all the flights for the next 15 days. Holy christ!

Gol is EXCELLENT. I flew with them to Sao Paulo in the beginning of the month and it was very good, good plane, good service, they even served us a snack (cereal bar), and uh, you don't need more than that for a 50 minute flight and just 50 dollars!

And it seems Avianca has already been bought by the Sinergy group.

^ Competition does a lot of wonders. In fact, I notice Air France and Lufthansa are offering transatlantic flights for US300 during the winter low-season. Comparatively, prices flying out from neighboring Canada costs almost double that amount.

I believe South American airlines need to grow and mature a bit more before national goverments will allow more foreign competition.

Good news for GOL and Brazilian aviation, I hope this flight will leave from my city, that since a reform (construction of a new passenger terminal, ampliation of the lane and a new avenue connetion with the east region of the city) had begin, the international flights were canceled (it has only charters now) and some other national routes were canceled too, as the reform will end on the mid of the year, I hope this fligh of GOL from Santa Cruz leave from here.

About Vasp, I hope they close really soon, once I spent 20h on Cumbica airpot to take the a flight, and it was on high season so the flight was full, and something interesting happened, I help a group of Israelis (in english) and a group of Lebaneses (in french) who were waiting for the flight too, and didn't know what was happenig.

If VASP close, CVC (a Tourism operator) already said it will launch a new company, today they only have charter flights.

^ Competition does a lot of wonders. In fact, I notice Air France and Lufthansa are offering transatlantic flights for US300 during the winter low-season. Comparatively, prices flying out from neighboring Canada costs almost double that amount.

I believe South American airlines need to grow and mature a bit more before national goverments will allow more foreign competition.

yes it really does, I hope the companies get mature as you said, because I think that here in Brazil we don't flight as much as we should/could, Brazil is a huge country with a big population and the passanger numbers of the whole country is arround 80 milion (2003) passangers, that's the number of importat aiports arround the world alone.

Brazil Vasp Airline Faces Govt Audit, Possible Sanctions
25 January 2005
Dow Jones International News

SAO PAULO (Dow Jones)--Financially troubled Brazilian airline Vasp faces a government audit and possible sanctions because of massive cancelations of flights in recent weeks, Brazilian Vice President Jose Alencar said Tuesday.

Alencar spoke to reporters following a meeting with Vasp executives in Brasilia. Alencar was quoted by the Estado news agency.

"As a concession-holder, Vasp must follow certain rules, and one of them is maintaining its regular schedule of flights," Alencar said. Alencar serves simultaneously as Brazilian vice president and as defense minister. In the latter capacity, he holds responsibility over civil aviation affairs.

In recent weeks, Vasp has adopted a policy of routinely canceling flights that aren't at least half full.

Following Tuesday's meeting with Alencar, Vasp President Wagner Canhedo said the airline will continue to cancel flights, based on the 50% policy, "for the next 15 days or so."

Alencar said he has ordered the Defense Ministry's Civil Aviation Department to audit Vasp's books.

"Once the audit is completed, we will decide what to do about Vasp," said Alencar.

Civil Aviation Department officials said the audit will be completed within a few days. They said government sanctions against Vasp could include heavy fines and permanent cancelation of routes.

Vasp suffered a dramatic loss of market share in 2004. Earlier in January, a Civil Aviation Department report showed that Vasp's market share had fallen to only 0.7% in December compared with 11.9% one year before.

The company has been experiencing financial difficulties since the 2001 recession that hit the industry.

Vasp's debts include 760 million Brazilian reals ($1=BRL2.68) owed to the Federal Airport Authority, known as Infraero, for airport charges not paid since the 1990s.

Currently, Vasp is operating on a six-month emergency license granted by the federal government pending presentation of a comprehensive financial plan.

-By Tom Murphy, Dow Jones Newswires

Does anyone have a list over the market share of airlines in South America?

Does anyone have a list over the market share of airlines in South America?

nops, but I'd like to see it too.


:okay:

Brazil's Civil Aviation Dept Cancels Eight Vasp Routes
27 January 2005

SAO PAULO (Dow Jones)--Brazil's civil aviation department, or DAC, has canceled licenses for the last eight regular passenger routes operated by Brazilian airline Viacao Aerea de Sao Paulo SA, or Vasp, a DAC spokesperson said Thursday.

The decision effectively ends all regular flights operated by financially-burdened Vasp, though the firm can still operate charter flights and could technically request new routes, according to DAC.

The company still has its six-month emergency permission to fly granted by the federal government pending presentation of a comprehensive financial plan. The emergency license expires in April.

Vasp officials were not immediately available for comment early Thursday morning.

Vasp, which suffered a dramatic loss of market share in late 2004, has recently taken to canceling any passenger flight with less than 50% occupancy.

Meanwhile, late Wednesday, the company said it "deeply regretted" the decision by company employees to walk out on an indefinite strike at midnight.

In a statement, Vasp said the only way for the company to survive was by a joint effort of management and staff. Some 800 staff voted to start the strike due to delays receiving their salaries.

The company has been experiencing financial difficulties since the 2001 recession that hit the industry.

Its debts include 760 million Brazilian reals ($1=BRL2.66) owed to the Federal Airport Authority, known as Infraero, for airport charges not paid since the 1990s.

The financial problems have also hit a number of other local airlines, including Transbrasil, which has was forced into bankruptcy in 2001, and Brazil's largest airline, Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, which is currently negotiating a rescue package with creditors and the government.

-By Rogerio Jelmayer, Dow Jones Newswires

^^^^

the local news are saying that Vasp is lilkly to regain is right to flight on other routes and that the Federal government will help the company.

Do any S. American carriers operate 747s still?

Do any S. American carriers operate 747s still?
yup, Aerolineas Argentinas and I think Varig

Southern Winds (Argentina) also do it...

The problem with air companies over here in South America is that their tickets are ULTRA expensive. Mind you, last week I was just checking some fare prices in Expedia and I discovered that a NYC - London return ticket costs 340 dollars! That's a 7 hour flight, in South America a Sao Paulo - Buenos Aires ticket costs the same, and it's a 2:30 hour flight!

Yeah, in the 90's I remember it was actually cheaper to fly Sao Paulo to New York than from Sao Paulo to Fortaleza! :nuts:

Oh no. :( I've always thought that VASP had the coolest Airline colors.

Born from a bus company, Brazil's Gol airline spreading wings in South America
By ALAN CLENDENNING
31 January 2005

SAO PAULO, Brazil (AP) - In a country where domestic air travel meant free whiskey in coach class only a few years ago, an airline born from a bus company is attracting travelers in droves to flights where such frills are non-existent.

The low-cost phenomenon launched by Gol even extends to the company's executive domain -- a squat, four-story building with no elevators where visitors trudge up the stairs to meet with the airline's management team.

Four years after scrambling to get six planes flying in time to profit from Brazil's busy summer travel season, Gol has carried 23 million passengers in Latin America's most populous country and is spreading its wings abroad.

Gol, which took to the skies in 2001 serving just seven Brazilian cities, now has nearly 30 new Boeing 737s traveling to 38 destinations across this country almost the size of the continental United States.

The family-controlled company introduced Brazilians to online sales, ticketless travel and cold sandwiches and soft drinks instead of hot meals and booze. Forget about first class, business class or frequent flier miles: They're not offered.

And the airline is spreading its wings abroad, starting its first international route to Argentina in December and pledging to start service to Bolivia by June. Analysts predict the carrier's next stops could be Colombia, Ecuador, Paraguay, Peru or Uruguay.

Growth for Gol, which translates as "Goal" in both Portuguese and Spanish in soccer-crazed Latin America, has come with plenty of challenges. The company got off the ground with a big marketing splash just nine months before the Sept. 11 travel drop-off.

Then Brazil's aviation industry was hit in 2002 by a huge devaluation of the Brazilian currency that pushed other domestic carriers to the verge of bankruptcy because airline costs like fuel and aircraft leasing payments are linked to the dollar.

Brazil, which has South America's largest economy, went on to flirt with recession in 2003 amid sky-high interest rates.

But Gol, whose full name is Gol Linhas Aereas Inteligentes SA, managed to steadily increase its Brazilian market share by offering passengers lower fares than its rivals during the bad economic times.

"We thought people would be more price sensitive in those environments," chief executive Constantino Oliveira Jr. said in an interview. "So we converted the crises into opportunities for growth."

Gol says its fares are typically 20 percent less than its competition, but frequent business flier and software company executive Miguel Garcia says he sometimes gets a 30 percent discount flying Gol instead of other airlines.

"The service is more basic, but it's worth it for the price," Garcia said after a dawn flight from Sao Paulo to the southern city of Porto Alegre that included a boxed cold breakfast and apple or grape juice. There was no orange juice and no coffee.

In keeping with Gol's mantra to do everything on the cheap, the carrier outsources phone reservation call centers and uses one type of plane to save on maintenance and pilot training costs. Children get toy planes as presents -- but the planes, made of paper, look like bookmarks.

Cost-cutting runs in Oliveira's blood, courtesy of his father, a former long-haul trucker who started a bus company in the 1950s that became one of the country's biggest.

"He always said 'When you can save on costs, why spend? There's a cost benefit every time,'" Oliveira said of his father.

The younger Oliveira, who became a licensed pilot at age 17 and rose through the ranks at the bus company before starting Gol, said his father always wanted to offer a low-cost air travel alternative in Brazil. But he held back because of the country's tight regulation over the industry, including government-set prices for tickets in the 1980s and '90s.

The regulatory climate eased in the late 1990s just as Internet use mushroomed in Brazil. And one of the country's major airlines, Vasp, started laying off workers and slashing routes, creating a ready labor pool of experienced airline executives and pilots.

The Oliveiras sensed the timing was right in the summer of 2000, snagged talent from Vasp and launched the airline seven months later with an initial investment estimated by analysts at US$12 million (euro9.2 million). The first flight came one month later than the elder Oliveira wanted, but in time to capitalize on the annual passenger demand crush in Brazil during South America's summer.

Focusing on business travelers and Brazilians who had never flown before, Gol's domestic market share grew from 12 percent in 2002 to 24 percent by 2004, putting it in the No. 3 position behind Varig and Tam -- and far ahead of Vasp, whose market share declined to less than 1 percent by the end of last year.

Investors have taken notice, snapping up shares during Gol's initial public offering last summer in Sao Paulo and New York, which raised $280 million (now euro215 million). The company's American depository shares are up 60 percent since the IPO, amid analyst predictions they could go 20 percent higher this year.

"We view Gol as one of the best long-term investment stories in the airline universe today," Morgan Stanley analyst William Greene said in a note to investors.

Analysts say Gol's expanding presence in South America will put pressure on traditional carriers to keep prices down, but believe the airline will keep up with competition from other low-cost airlines like Chile's Sky, Uruguay's Uair and Brazil's OceanAir.

"The only risk, which in Constantino Jr.'s case I don't see, is believing they can walk on water," said Robert Booth, a Miami-based aviation consultant and editor of an aviation newsletter focusing on Latin America.

Brazil's TAM Airline Sees Market Share Slip In February
07 March 2005

SAO PAULO (Dow Jones)--Brazil's largest domestic airline, TAM Linhas Aereas SA (TANC4.BR), saw its market share tail off in February, having leapt nearly nine percentage points since before the collapse of Viacao Aerea de Sao Paulo SA, or Vasp.

TAM's market share in February was 41.8%, down from 44.4% in January, according to DAC. The figures show TAM was the largest beneficiary from the demise of Vasp, which collapsed under a mountain of unpaid bills.

After months of debt-induced decline, the DAC canceled Vasp's remaining regular routes in late January, although the airline continues to operate some charter and cargo flights.

TAM's market share was 33.2% in April 2004, just before Vasp's traffic levels started to plummet.

Brazil's low-cost airline, Gol Linhas Aereas Inteligentes, had a market share of 24.1% in February, up from 23.3% in January. Gol also gained off Vasp, having just 20.3% market share in April 2004.

Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, had a market share of 31.4% in February, up from 30.5% in January, which was in turn identical to the market share reported in April 2004.

The slew of other domestic airlines with regular routes failed to capitalize on the fall of Vasp, according to DAC figures. Their combined market share in February was 2.2%, up fractionally from 2.1% in April 2004.

The data does not include non-regular charter flights.

In terms of the actual number of passengers transported, TAM carried 955,869 in February, up 35% from April 2004, while Gol carried 553,685, up 28% in the same period, and Varig carried 730,020, up 12%.

The total number of passengers carried by domestic Brazilian carriers in February was 2.29 million, up 7.5% from 2.13 million a year ago.

In a statement, Gol said its load factor, the number of passengers transported versus the total number of seats available, was 71% during February.

Gol said it reached a load factor of 77% on its international routes to Argentina, which launched in December 2004. The company has a 2% share of international flights.

Including international operations, Varig remains Brazil's largest airline. Varig carried 1.67 million passengers on international routes in February, or 82.1% of the share of international traffic amongst Brazilian carriers.

Chile Airline Lan: Has Held Talks With Argentine Carrier
07 March 2005

SANTIAGO (Dow Jones)--As it pursues expansion into Argentina, Chilean airline Lan SA (LFL) has held preliminary talks with troubled carrier Southern Winds as well as the Argentine government, the company said Monday.

Lan, which wants to become the region's top airline, has sought to expand to Argentina for some time.

"In this context, the company has held talks with the Argentine government and also with Southern Winds," Lan said.

"Once this interest is materialized in concrete agreements, the company will communicate this at an opportune moment," it added.

Coming off record earnings in 2004, the company needs to expand to maintain a strong pace of growth, analysts say.

But after expanding to the Dominican Republic, Ecuador and Peru, Lan hasn't hatched fledgling airlines recently, despite manifest interest to do so in Argentina, Brazil and Colombia.

Argentina and Brazil lie at the top of the target list, Chief Financial Officer Alejandro de la Fuente said last week.

Meanwhile, Southern Winds has suffered severe turbulence in recent weeks.

Technically a private company, it has planes and flight slots, but its staffing comes from state airline LAFSA.

On Feb. 24, the Argentine government failed to renew an 18-month cooperation agreement between LAFSA and Southern Winds, which is embroiled in a drug trafficking scandal involving cocaine-laden baggage sent to Spain.

The government created LAFSA in July 2003 so that 800 former workers at defunct airlines Lapa and Dinar would have jobs.

The airline didn't have any planes of its own, so officials brokered a deal with Southern Winds. The private carrier agreed to infrastructure-sharing rights with LAFSA in exchange for fuel subsidies.

The populist government of President Nestor Kirchner has taken an active role in public services.

But it appears Kirchner isn't eager to wade into the airline sector, given the drug-trafficking scandal and ongoing blame game between government authorities and Southern Winds over responsibility for the scandal.

Beyond Lan, Argentine media have also pegged Brazilian carrier TAM Linhas Aereas SA (TANC4.BR) as an interested party in LAFSA.

- By Stephan Kueffner, Dow Jones Newswires

Do any S. American carriers operate 747s still?

From what I know, the only South American carriers operating the 747 in passenger service are Aerolineas Argentinas, Southern Winds and Surinam Airways....operating their sole (ex-KLM) 747-300 to/from Amsterdam 3 times a week:

http://home.wanadoo.nl/airruud/747suri.jpg


Varig 747s have been withdrawn from service in the mid-90's.......

Govt Welcomes New Airlines In Brazil Mkt: Palocci - Report
08 March 2005

SAO PAULO (Dow Jones)--The government welcomes the entrance of new airlines into the Brazilian travel market, Finance Minister Antonio Palocci said Tuesday.

"We should stimulate the entrance of new companies into the Brazilian airline market," Palocci was quoted as saying by the Estado news agency at a travel industry event.

The Brazilian airline industry was hurt by a recession from 2001 through 2003, leaving some of the traditional industry leaders with heavy losses and debts. The most affected was traditional flag carrier Varig (VAGV4.BR), which carries debts of some 6 billion Brazilian reals ($1=BRL2.68). Another major carrier, TAM (TANC3.BR), has also been hit with heavy debts.

Palocci said, "We want to make sure there is a healthy environment for the airlines operating here, as a way to guarantee competition and benefits for consumers."

He said the government is following negotiations between Varig and its creditors with interest, but he said the government was interested only in "market solutions" for the company.

"I don't think the state trying to regulate the industry, or control market size or boost prices, is the solution," he said. "We believe in competition. There are some industries in Brazil which are afraid of competition and this is a problem in the airline industry."

Brazil's Varig Lashes Out Over Possible Govt Takeover
11 March 2005

SAO PAULO (AP)--Brazil's flagship airline, Varig (VPTA4.BR), lashed out Friday against lawmakers who want the government to take over the carrier and ensure it doesn't collapse under a mountain of debt.

"This effort makes no sense at a time when Varig is honoring its commitments despite enormous difficulties," Varig said in a statement a day after the lawmakers said Brazil's vice president confirmed that a takeover was possible.

Vice President Jose Alencar was noncommittal several months ago when asked if the government would take over Varig, but legislators said he told them a takeover is possible as long as it happens "within the limits of the law."

After his comments were widely reported in Brazil, Alencar said Friday that the government doesn't want to be in the business of running an airline, Brazil's official Agencia Brasil news agency reported.

"What the government wants is a market solution reached through negotiations with the company and new candidates to run it," said Alencar, who also runs Brazil's Defense Ministry, which oversees civil aviation.

Varig is struggling under crushing debt estimated $3.5 billion, much of it incurred after the Sept. 11 travel drop-off and a depreciation of the Brazilian currency in 2002 that forced it to pay more for dollar-linked costs like fuel and aircraft leasing payments.

But the country's largest airline, whose full name is Viacao Aerea Rio-Grandense, has been in operation for 70 years and is a source of deep national pride, so analysts believe the government won't allow it to go bankrupt.

Lawmakers were angered Tuesday when representatives of Varig's controlling shareholder, the nonprofit Rubem Berta Foundation, failed to show up in the capital of Brasilia for a hearing on the airline's future.

The foundation, representing Varig employees, has an 87% stake in the company and has repeatedly rebuffed efforts over the last several years to force it to relinquish control.

Criticizing the prospect of a government takeover as "radical and totalitarian," Varig called for a "fair solution" to resolve its problems, saying the future of Brazilian commercial aviation is at stake.

Varig has about 100 planes that fly to 110 Brazilian cities and 27 international destinations in 18 other countries. Although it is Brazil's largest carrier when international and domestic services are combined, the company has lost domestic share over the last several years to Brazil's other two major carriers, Gol Linhas Aereas Inteligentes SA and TAM Linhas Aereas SA.

A fourth carrier, Vasp, stopped operating in January after being plagued for years by debt, labor problems and an aging fleet. A Brazilian court Thursday night ordered the government to take over Vasp, whose full name is Viacao Aerea de Sao Paulo.

The judge also froze all personal assets of Vasp chief executive Wagner Canhedo, who bought the company from the Brazilian state of Sao Paulo in the early 1990s.

Vasp's debts include $281 million to the government for unpaid airport fees and $27 million to 2,000 employees.

Argentina Airline Union Protests Lan Accord With LAFSA
11 March 2005

BUENOS AIRES (Dow Jones)--The Argentine Association of Airline Workers called for a boycott of Chilean airline Lan (LFL) Friday to protest the company's agreement with the Argentine government to absorb all workers of state airline LAFSA.

After holding a press conference at Jorge Newbery, the Buenos Aires airport that is the hub for domestic flights, workers partially blocked the riverside highway that leads into the airport. The protesters lit flares and banged drums as cars maneuvered around the workers.

"Yesterday, President (Nestor) Kirchner called a boycott against Shell," said one unidentified union leader, shortly before the workers exited the building to block the road. "Lan Chile also hurts all Argentines. We're going to boycott Lan Chile. Boycott Lan Chile!"

On Friday morning, Argentine government officials and Lan executives announced that the Chilean airline has agreed to absorb LAFSA workers and will also guarantee operations and employment at troubled private carrier Southern Winds. Lan added that it is in negotiations with a third, still-unnamed Argentine airline to acquire that carrier. The Chilean company said its new holding, Lan Argentina, will have 51% private capital from Argentina.

The airline workers said Friday that Lan is seeking control of the domestic airline industry and that workers' rights would be trounced on, despite government promises to the contrary. Lan said it isn't buying LAFSA but rather allowing that airline's workers to join Lan Argentina if they desire.

Ricardo Frecia, the union's secretary general, said the union demands to know more about the holder of the 51% stake in Lan Argentina and who the company's future directors would be.

"We will not allow ourselves to be used as an excuse for these agreements that appear at night and where we have no idea where they're taking us," Frecia said.

LAFSA was formed in July 2003 to employ 800 former workers of defunct airlines Lapa and Dinar. The state airline never had any airplanes or infrastructure of its own. The government brokered an agreement with Southern Winds where the state would subsidize the private airline's fuel costs in exchange for infrastructure-sharing rights for LAFSA. Officials decided not to renew that 18-month accord in early March after Southern Winds became embroiled in a drug-trafficking scandal.

Kirchner travels to Chile next week, where he and his counterpart, Ricardo Lagos, are expected to focus on natural gas shipments to Chile.

- By Wailin Wong, Dow Jones Newswires

Chile LAN Airlines says Feb traffic rose 14.3 pct.

SANTIAGO, Chile, March 14 (Reuters) - Chile's dominant airline, LAN Airlines (LAN.SN) (LFL.N), said on Monday its passenger traffic rose 14.3 percent in February compared with the same month last year, on strong international traffic due to new routes to Peru.

The airline said international passenger traffic jumped 18.8 percent for the month, while domestic passenger traffic fell 3.8 percent due to reduced capacity after the airline scaled back domestic flights.

LAN's cargo traffic rose almost 14 percent in February, mostly due to strong growth in exports from South America during the period.

Spain's Marsans denies plans to sell Aerolineas Argentinas
15 March 2005

MADRID (AFX) - Spanish tour operator Marsans said it is not seeking to sell its 97.9 pct stake in Aerolineas Argentinas, denying an earlier report in El Mundo.

'This information is totally false,' Marsans sources said.

They noted, however, that Marsans maintains plans for the air carrier, such as including Argentine investors as part of its core shareholders and listing part of the airline in the stock market.

El Mundo said Marsans has hired two investment banks to find a buyer for its 97.9 pct stake in the Argentine air carrier, while noting that it has not totally ruled out seeking a financial partner for the business and keeping a majority stake.

Marsans acquired Aerolineas Argentinas in 2001 for some 615 mln usd.

Portugal GES Interested in Brazil Varig
16 March 2005
Portuguese News Digest

Portuguese financial group Grupo Espírito Santo (GES) is interested to buy a stake in the capital of Brazil's troubled flag airline Viacao Aerea Rio-Grandense (Varig), it was reported on March 16, 2005.

An unnamed official source from GES in Brazil reportedly said the group is negotiating a 20 pct stake purchase of Varig. According to Brazil's laws, the 20 pct stake is the maximum which a foreign company can own in the local airline sector.

GES, which is the main shareholder in local private air carrier PGA Portugalia Airlines, became the second Portuguese company showing interest in Varig, after tourism and leisure group Grupo Pestana confirmed its interest in buying a 20 pct stake in the carrier. On the other hand, Pestana denied information published in the Brazilian press that it had completed the negotiations of the purchase.

Source: Jornal de Negocios (VA/EP/TD)

Argentina's Southern Winds Airline Files For Bankruptcy
16 March 2005

BUENOS AIRES (Dow Jones)--Private Argentine airline Southern Winds has filed for bankruptcy - one month after it became mired in a drug-trafficking scandal.

A company representative confirmed that Southern Winds made the bankruptcy filing in a local court in Argentina, but declined to provide more details. The decision comes less than a week after Chilean airline Lan (LFL) reached an agreement with the government to guarantee Southern Winds operations and jobs for 90 days.

The Argentine airline ran into financial problems after the government decided in late February not to renew an 18-month agreement that had provided Southern Winds with about 8 million pesos ($1=ARS2.92) in fuel subsidies. In return for the subsidies, Southern Winds had agreed to share infrastructure with state airline LAFSA, which housed former workers of now-defunct Argentine carriers but had no planes of its own.

The government distanced itself from Southern Winds after local media broke the news that a September flight to Madrid had carried four suitcases containing 60 kilograms of cocaine. The drug-trafficking scandal, which is continuing this week with court testimony from senior Southern Winds executives, resulted in the dismissal of top officials at the National Aeronautical Police and Air Force.

A week ago, local media reports said Southern Winds was practically out of fuel and that the company contracted to manage its electronic reservations system had also suspended its service. That same week, Lan said it would guarantee Southern Winds' operations, as well as absorb all LAFSA workers into its new local unit, Lan Argentina.

TAM Plans to Offer Flights to New York in Deal with American Airlines
17 March 2005
Agencia Estado

Sao Paulo, 16 - TAM Linhas Aareas, Brazil's second-largest airline, on Wednesday confirmed plans to start offering flights to New York in a code-sharing agreement with American Airlines.

In addition, TAM has requested authorization from federal authorities to increase its weekly flights between Sao Paulo and Paris to 14 from the current ten later this year.

TAM has boosted its share of international flights to 15.85% in February from 11.57% a year earlier, according to recent data from the Civil Aviation Department (DAC).

Chile's Lan Seeks 20%-25% Of Argentina Airline Mkt -Report
17 March 2005

BUENOS AIRES (Dow Jones)--Chilean airline Lan SA (LFL), which announced its entrance into the Argentine airline sector last week, wants to capture between 20% and 25% of the domestic market in two years, the company's head of Argentine operations told local media Thursday.

In an interview with financial daily Ambito Financiero, Franciso Vidal said Lan is aiming to grow to 1,500 employees in Argentina in two years as well. A 20% to 25% piece of the local market would notably undercut the dominance of national flagcarrier Aerolineas Argentinas (AR.YY), which has an 85% market share.

Last week, Lan said it had reached a preliminary accord with the Argentine government to absorb 800 workers of state airline company LAFSA, created in 2003 to house employees of two defunct Argentine carries. In addition, Lan is guaranteeing operations at troubled private carrier Southern Winds for 90 days and is in negotiations to acquire a third Argentine airline.

The Chilean company is setting up a new local subsidiary, Lan Argentina, which will have 49% foreign ownership and 51% in the hands of local investors.

Vidal told the newspaper that Lan's purchase of an Argentine airline will give it control over routes, though it will need to go through a public hearing to bid for destination cities.

"The reason for buying a local company is the speed that gives us to enter the Argentine market: they have a ready portfolio," he was quoted as saying. "Between those possibilities, definitely, is not the purchase of Southern Winds. I don't deny that we've looked at it, but we're opting for other alternatives."

Vidal declined to comment on the reported sale of Aerolineas Argentinas, whose spokesman told a local news agency this week that its majority shareholder, Spanish travel group Marsans (GMSN.YY), was seeking to reduce its stake in Aerolineas Argentinas or sell its Argentine assets altogether. Marsans officials were later quoted in Spanish media denying a sale, and the matter remains unresolved.

Southern Winds filed for bankruptcy Wednesday. Vidal clarified that Lan's agreement to guarantee operations at that airline means passenger transport, not direct monetary support or a fuel subsidy like the one Southern Winds had been receiving under an 18-month agreement with LAFSA. The government let that arrangement lapse in February, when Southern Winds became embroiled in a drug-trafficking scandal.

In the interview with the newspaper, Vidal acknowledged Argentine airline workers' protests against Lan. The union, which is resisting LAFSA employees' absorption into Lan Argentina, demonstrated at Buenos Aires' regional airport Thursday morning and is threatening to disrupt service next week during the busy four-day Easter vacation period.

"We're going to absorb the 800 employees of LAFSA and not any other companies," Vidal said. "We know of the demonstrations against this, but we separate what is union activity from people's desire to work."

Vidal added: "We didn't come here to eliminate competitors, rather to make the airline market grow ... In none of the countries where we are have we taken anyone out of the market ... Nor will we apply predatory fares: we've never done that."

Vidal said Lan plans to incorporate 90 airplanes between now and 2008, though the company's entrance into Argentina will call for at least a dozen more.

- By Wailin Wong, Dow Jones Newswires

Brazil Varig To Launch Three Additional Rio-Lisbon Flights
18 March 2005

Brazil's troubled flag carrier Viacao Aerea Rio-Grandense (Varig) will launch on March 31, 2005 three additional weekly flights between Rio de Janeiro and Portugal's capital Lisbon to meet the demand during the European summer.

The flights are planned to be maintained until July 27, 2005 but they could also become regular if the occupancy of planes is guaranteed, the company was quoted as saying on March 17, 2005.

Varig planes are planned to take off from Lisbon on Tuesdays and Thursdays at 1045 local time and on Sundays at 1045 as well. The return flights to Lisbon will be on Tuesdays and Thursdays at 2035 and on Saturdays at 1940.

Varig now carries out daily flights to Lisbon from Brazil's major cities of Rio de Janeiro and Sao Paulo along with another 21 weekly flights operated on a code-sharing basis with Portugal's flag carrier TAP from Sao Paulo, Rio de Janeiro, Recife, Natal, Fortaleza and Salvador.

Source: O Globo

Brazilian low-cost carrier to buy four Boeing 737-800s
23 March 2005

SEATTLE (AP) - GOL Linhas Aereas Inteligentes SA is exercising options to buy four more Boeing 737-800 passenger jets worth up to $278 million at list prices, the low-cost Brazilian carrier and the aircraft manufacturer announced Wednesday.

Under the contract with Boeing Commercial Airplanes, the carrier increased its number of firm orders to a total of 30 737-800s -- six for delivery next year, 13 in 2007, seven in 2008 and four in 2009.

The 737-800 carries list prices of $61.5 million to $69.5 million but discounts are common, especially in multiple orders.

GOL now operates 29 Boeing 737s with a single class of service on flights within Brazil and Argentina.

Brazil Gol Airline Set To Offer Shares in Brazil, US
28 March 2005

SAO PAULO (Dow Jones)--No-frills Brazilian airline Gol Linhas Aereas Inteligentes SA (GOL) has filed papers with government authorites in both Brazil and the U.S. relating to a proposed offering of preferred shares in both markets, the company said in a statement Monday.

Gol said it intends to offer 10,200,900 in new preferred shares. In addition, BSSF Air Holdings LLC, an affiliate of AIG Capital Partners, will sell a stake worth 10,199,100 shares in Gol.

Gol said it will offer another 3.06 million shares if there is sufficient demand.

The shares will be offered to local markets and also in the U.S. in the form of American Depositary Shares, or ADSs. Each ADS represents two preferred shares.

The international offering will be led by Morgan Stanley as sole bookrunning manager, and Merrill-Lynch & Co., Raymond James, and Santander Investment Ltd. as joint lead managers.

Meanwhile, the local offering will be led by Banco Santander Brasil S.A., Banco Morgan Stanley Dean Witter S.A., and Banco Itau BBA S.A.

Morgan Stanley will be global coordinator of the offering.

Latin American Airlines Traffic Up 18% In January
30 March 2005
Dow Jones News Service

SANTIAGO (Dow Jones)--Latin American airlines carried 6.5 million passengers in January, 18% more than in the same month a year ago, the Latin American Airline Association, or Aital, said Wednesday.

Intra-Latin American routes showed the most notable growth, rising 35% over January 2004 to reach 1.2 million passengers.

Domestic traffic grew 15% in the month, with 3.8 million passengers carried, while traffic to the U.S. and Canada from Latin American countries increased 15% to almost 1 million passengers.

Capacity rose 12% in January, reaching 15,044 million available seat kilometers, or ASKs. Intra-Latin American routes jumped 31%, while routes to the U.S. and Canada increased 12.5%, according to Aital data. Passenger load factor reached 72.2, up 3.5% on the year.

Freight-ton kilometers carried in passenger services grew 2.2% in January from the year before, while freight-ton kilometers carried in all-cargo services fell 2.1%, the association said.

Boeing Projects Another Strong Sales Yr In Latin America
06 April 2005

MEXICO CITY (Dow Jones)--A Boeing Co. (BA) official said Wednesday the company expects another strong sales year in Latin America.

"We see some strong demand in Latin America," said John Wojick, Boeing's vice president of sales for Latin America and the Caribbean.

The Bellevue, Wash.-based company sold 34 planes in the region last year, representing about 12% of the 280 units it sold worldwide in 2004.

Last year was one of the best sales years the company has had in the region in some time, Wojick noted.

Wojick ticked off a list of Boeing customers in Latin America, such as Chilean carrier Lan Airlines SA (LFL), that are flying high and could demand more aircraft.

Worldwide, Boeing delivered 70 aircraft in the first quarter of 2005, putting the manufacturer on track to meet its full-year forecast of 320 units.

AeroMexico, one of Mexico's two flagship carriers, has planned its international service growth around Boeing technology.

New aircraft leases should help the carrier increase service on popular routes like Mexico City-Madrid, said Carlos Bonilla, director of corporate communications for AeroMexico.

"We'll continue to add to the fleet as the market permits," Bonilla said.

AeroMexico has incorporated 16 new Boeing craft into its 70-plane fleet since undertaking a modernization plan in 2003. The company has also ordered two specially designed aircraft that are due to operate in early 2006.

Mexico's other major airline, Mexicana, primarily employs planes designed by European aircraft maker Airbus (ABI.YY), and has been updating its 60-unit fleet over the past five years.

The Mexican government hopes to sell AeroMexico and Mexicana separately by early 2006. The carriers have acted almost as a monopoly since their combination in the early 1990s.

The government rescued the airlines and related assets from financial problems in 1995 and created holding company Cintra SA (CINTRA.MX) to manage them. Credit Suisse First Boston is managing the airline sale. Foreign investors are limited to 25% voting stakes in the carriers.

Peru Denies Airport Group Request For Transit Fee
07 April 2005

LIMA (Dow Jones)--Regulatory agency Ositran has ruled that the Lima Airport Partners, or LAP, consortium can't charge airline passengers for using Lima's main airport when they transfer from one flight to another.

In a statement released late Wednesday, Ositran said that passengers already pay a fee for using the airport, the so-called TUUA.

"The concession contract doesn't give LAP the right to charge passengers in transit," Ositran President Alejandro Chang said on CPN radio Thursday.

In a statement, LAP said it was evaluating legal measures to protect its investments in Lima's Jorge Chavez airport.

"With its decision Ositran is exonerating passengers in transit from paying for the services that they receive in the airport during a stop over in Lima," LAP said.

Ositran's Chang said that LAP wanted to charge up to $28.24 per passenger, and he also ruled out any appeal.

"The theme of appealing can't be considered. What we have done is confirm an opinion that has been made before, which is that LAP can't charge a fee for transfers for passengers who come from another country and change flights," Chang said.

LAP, controlled by Fraport AG Frankfurt Airport Services Worldwide (FRA.XE) and Alterra Partners, took over management of the Lima airport in 2001 with a 30-year contract.

It has invested millions of dollars to improve the once-shoddy airport.

Ositran also is evaluating the final rate that LAP will be able to charge airlines for the use of newly installed walkways from the airplanes to the terminal.

Various airline companies have complained that proposed fees for using the walkways are too high. The airlines are also concerned about high fueling costs at the airport.

In 2004, Lima had 5,077,295 passengers, an 11.9% increase from the previous year.

LAP eventually plans to construct a new runway, a hotel at the airport and to keep expanding the terminal.

Lima's airport, opened in 1965, receives more than 90% of Peru's air traffic.

Brazil Airline Gol Pares Down Offering To 14.7M Shares
11 April 2005

SAO PAULO (Dow Jones)--Brazilian no-frills airline Gol Linhas Aereas Inteligentes SA (GOL) Monday said it has cut its planned public offering of preferred shares to 14.7 million, from the original figure of 20.4 million.

In a statement, Gol also said it will now issue 5.52 million new preferred shares to be sold to the public, about half the original total of 10.2 million shares. In addition, BSSF Air Holdings LLC, an affiliate of AIG Capital Partners, will sell 9.18 million shares it already owns in Gol through a secondary offering, roughly 1 million shares less than the planned sale of 10.2 million shares.

The shares will be priced on April 27, Gol said.

The shares will be offered to local markets and also in the U.S. in the form of American Depositary Receipts, with each ADR representing two preferred shares.

Morgan Stanley (MWD) is the global coordinator of the offering.

The international offering will be led by Morgan Stanley as sole bookrunning manager, and Merrill Lynch (MER), Raymond James (RJF), and Santander Investment (SBR) as joint lead managers.

The local offering will be led by Banco Santander Brasil, Banco Morgan Stanley Dean Witter, and Banco Itau BBA.

New airline democratizes Brazil's skies
Discounter Gol Airlines to expand across South America
Andrew Downie
03 May 2005
Christian Science Monitor

SAO PAULO, BRAZIL

In an age when airlines are going bankrupt faster than you can say Chapter 11, some might say that starting one in a developing nation like Brazil was a brave decision.

But since taking off in January 2001 with just six planes and seven destination cities, Gol Airlines has proven itself a worthy successor to the US and British discounters that founder Constantino de Oliveira Jr. used as templates. The youthful Mr. Oliveira sought to create affordable travel by "taking a bit of Southwest, a bit of Ryanair, a bit of JetBlue, and Easyjet and tropicalizing them for the Brazilian market," he says.

Just don't expect the stewardesses to dress up like Carmen Miranda.

The result has been nothing short of the democratization of Brazil's friendly skies, helped out by a partnership with US aircraft-maker Boeing - the first of its kind for a Latin American carrier. "Around 10, 11 percent of our passengers are flying on planes for the first time in their life," says Oliveira, a former race-car driver and onetime head of one of Brazil's largest bus companies. "People think a low-cost airline is for poor people, but it isn't; it's for people who have an eye for competitive prices," he says.

The company whose name means "goal" now boasts 31 planes, travels to 41 destinations, and has 22 percent of Brazil's domestic passenger market. It turned a profit of $145 million last year.

In a nation where even the 50-minute flight from Rio de Janeiro to Sao Paulo on the major carriers costs more than the country's $120 monthly minimum wage, Gol charges just $79.

Gol was fortunate to start operating when regulatory conditions were favorable, the price of modern telecommunications equipment was falling, and a large number of experienced workers were looking for employment. But the Sao Paulo-based company also aggressively cut costs, swapping steak dinners and booze for sandwiches and soft drinks, and allowing tickets to be booked over the Internet.

But Oliveira says no decision was more important than building a partnership with Boeing. Bucking the conventional wisdom that said budget airlines fly budget planes, Oliveira signed a deal to secure brand new Boeing 737-700s and 737-800s. Developed in the mid-1990s, the new-generation Boeings are among the most modern and economical jets on the market; their reliability helps Gol keep each plane in the air an average of 14.3 hours a day, a good three hours more than its closest rival.

Gol's enthusiastic embrace of Boeing's phased maintenance program - in which engineers repair and review planes every time they touch down rather than at the end of set periods - has helped slash maintenance costs. Gol will add 26 new Boeings by 2009 and has options to buy another 37. Each with its distinctive orange fuselage will come built to the company's own specifications - the first time Boeing has agreed to purpose-build planes for a Latin American airline. The jets, for example, are adapted to take off and land at Rio's Santos Dumont Airport, which has a short runway.

"We worked very closely with Gol to come up with a solution for them," says John Wojick, Boeing's vice president for Latin American and Caribbean sales. "Gol is a very, very important partner for us."

Another vital factor in the company's success is its personnel. In a country where the service does not always match the smile, Gol stresses the importance of teamwork and customer relations. For example, when pilots enter flight simulators for their annual refresher course on emergency procedures, cabin crew accompany them so they will have a better understanding of what the pilot is dealing with if a stressful situation arises.

To prevent cliques and promote a team spirit on board, every four- member cabin crew is comprised of two newcomers and two veterans with experience from different airlines. A goal-oriented, profit- sharing program that last year saw employees take home an extra four months of salary in bonuses helps keep productivity and morale high. Even Oliveira does his bit to show employees they matter; once a month, he hosts a sit-down lunch with 10 members of staff, drawn at random.

"The thing that most impresses me about Gol is their whole culture," says Bobby Booth, Miami-based editor of Avnews Latin America, a monthly newsletter that covers regional aviation issues. "Everyone thinks about this business as 'capital intensive.' Southwest and ... Gol, have proven that they are also 'people intensive.' "

Gol is part of a trend going on south of the Rio Grande. In Uruguay, Argentina, and Mexico, similar discount airlines are either up and running or are revving their engines for take off, industry experts say. Air Madrid recently began flying to seven Latin American destinations from Spain, and US budget carriers JetBlue and Spirit are also expanding into Latin America later this year.

"It is definitely a trend," says Mr. Booth. "It began in the US, followed in Europe and Asia, and is finally arriving in Latin America and the Caribbean."

The decision by Brazilian passengers to fly Gol has taken a bite out of the competition. Both Transbrasil and VASP have folded since Gol took to the skies, and although Varig and TAM still control two- thirds of the Brazilian market, how long they maintain that dominance is an open question. Gol is aggressively adding routes inside Brazil, and after putting Argentina on its schedule last December, it soon hopes to add Bolivia, Chile, and Uruguay.

"In 2000, our goal was to become a recognized world leader in low- cost, low-fare airlines by 2005," Oliveira says with a confident smile. "Now that we have achieved that goal we are setting ourselves the challenge of becoming known as the airline that popularizes air transport in South America by 2010."

Achieving that would be nothing short of a revolution. An orange revolution.

Texas Pacific Interested In Brazil's Varig Airline-Report
03 May 2005

SAO PAULO (Dow Jones)--The U.S.-based Texas Pacific Group (TPG.XX) is looking at a possible purchase of Brazil's largest airline, Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, local newspaper O Estado de Sao Paulo reported in its Tuesday editions.

The U.S. group has begun an analysis of Varig's financial situation in a process that could extend over 90 days, the newspaper said.

Meanwhile, Varig itself - burdened by huge debts - is analyzing several other acquisition proposals, according to local reports.

Two Brazilian entrepreneurs, Nelson Tanure and German Efromovich, have separately expressed an interest in buying Varig. According to market analysts, Brazil's Planner Group, a Portuguese investment group and a Swiss group have also submitted offers.

If the Texas Pacific Group were to buy a stake in Varig, it would need a Brazilian partner. Under current laws, Brazilian airlines can't be controlled by overseas owners.

TAP-Portugal wants to merge with Brazil's Varig: report

LISBON, May 4 (AFP) - Portuguese flag carrier TAP-Portugal has proposed a merger with Brazil's heavily-endebted Varig airline that would allow it to dominate air traffic across the south Atlantic, business daily Jornal de Negocios reported Wednesday citing a source close to the process.

The deal would make state-controlled TAP, whose Brazilian president Fernando Pinto is a former head of Varig, the main shareholder of the merged airline with a 20 percent stake, the report said.

Under Brazilian law, foreign companies can acquire a maximum 20 percent stake in the airline sector.

Portugal's Public Works and Transport Minister Mario Lino told the newspaper a final say in the matter would be up to the TAP president.

"I have a great deal of confidence in the management team at TAP and I have followed with great interest the steps that have taken with regards to closer ties with Varig," he said.

TAP-Portugal and Varig entered into a codeshare agreement in October which allows the two airlines to sell tickets on each other's flights between Portugal and Brazil and allows customers to pool frequent flier miles from both firms.

Asked about the proposal, which the newspaper said it had seen a copy of, Pinto would only say that "it is obvious that TAP is not indifferent to the destiny of Varig."

TAP-Portugal is the European airline with the most scheduled services to the Latin American country, a former Portuguese colony.

It offers daily service to five major Brazilian cities and Pinto has said he intends to turn the airline into a hub for travel from Europe to Brazil.

The Brazilian government has been looking ways to ensure that Varig, the nation's second-largest airline, does not collapse under a mountain of debt.

Last month the Brazilian flagship airline said it had slashed its net loss to 87 million reais (27.1 million euros, 34.9 million dollars) in 2004 from 1.8 billion reais in the previous year, its best result since 1999.

Government officials in Brazil have suggested that a possible solution would be a temporary nationalization of the company, whose debt stood at 5.7 billion reais at the end of 2004.

TAP-Portugal has been in talks with Portuguese private airline Portugalia, the nation's second-largest, but the negotiations have reportedly become bogged down and the two carriers have started looking elsewhere for alliances.

Brazilian carrier Varig may be placed under control of state bank - report
5 May 2005

SAO PAULO (AFX) - Banrisul, a bank run by the state of Rio Grande do Sul, may assume management of airline Varig SA, as part of the carrier's restructuring, financial daily Gazeta Mercantil reported, citing sources.

One of the missions of Banrisul would be to find an investor to refloat the company.

Varig has between 6.5-9 bln reals in debt, Gazeta Mercantil said.

Portugal's state-controlled airline TAP-Portugal is reportedly among five candidates to buy a 20 pct stake in the Brazilian airline.

Fernando Pinto, chairman of TAP-Portugal, dismissed suggestions that TAP plans to acquire Varig or merge with it.

According to Pinto, TAP has simply presented a financial restructuring plan for Varig.

Brazil GOL Airline Completes Global Share Offering
6 May 2005

SAO PAULO (Dow Jones)--Brazilian no-frills airline GOL Linhas Aereas Intelgentes S.A. (GOL) announced Friday it has completed a global offering of shares totaling 593.7 million Brazilian reals ($1=BRL2.465).

In a statement, GOL said it offered a total of 16.9 million shares. Of the total, 7.72 million were sold through a primary offering and 9.18 million under a secondary offering.

Part of the offering referred to a stake held by BSSF Air Holdings LLC, an affiliate of AIG Capital Partners.

Each share was sold for BRL35.12.

GOL said that, of the total, 4.06 million shares were sold in Brazil, and 12.84 million were distributed in the U.S. in the form of 6.42 million American Depositary Receipts. Each ADR represented two preferred shares.

The international offering was led by Morgan Stanley as sole bookrunning manager, and Merrill Lynch (MER), Raymond James (RJF) and Santander Investment (SBP) as joint lead managers.

The local offering was led by Banco do Brasil (BBAS3.BR) and Banco Safra.

Portugal Negotiates Brazil Airline Bailout
6 May 2005

BRASILIA (AP)--Portugal will give Brazil access to European markets in exchange for more Brazilian investments in the European country, Portuguese Foreign Minister Diogo Freitas do Amaral said Friday.

Amaral said he and Brazil's Vice President Jose Alencar discussed a proposal by Portuguese airline TAP to bail out Brazil's debt-ridden flagship carrier Varig. Amaral didn't give details but said Portugal expects more investment from Brazil.

"What we'd like now is reciprocity...Brazilian investment in Portugal, and we know that many top companies could make an important contribution," Amaral told reporters at the Portuguese embassy.

Amaral, on his first overseas trip since taking office in March, met with Brazilian President Luiz Inacio Lula da Silva and Foreign Minister Celso Amorim during his two-day visit. But his focus was courting Brazilian companies.

"What we told them modestly is that if they want to enter (the European market) through the Portuguese door, it will be wide open," he said.

Brazil invests only about $100 million to $200 million a year in Portugal, mostly in infrastructure companies. Meanwhile, Portuguese investments in Brazil average $500 million and peaked at around $2.4 billion in 1999 and 2000, when Portugal bought Brazilian phone companies sold by the government.

Asked about the negotiations between TAP (TPA.YY) and Varig (VAGV4.BR), Amaral said the talks haven't concluded. Varig has an outstanding debt estimated at 9.5 billions reals, or about $3.8 billion.

"The decision is up to the shareholders," he said. "But we won't interfere."

Earlier this week, Portuguese Prime Minister Jose Socrates said TAP, Portugal's state-owned carrier, is negotiating with Varig but that no deal was imminent.

The Portuguese newspaper Jornal de Negocios reported Wednesday that TAP had offered to merge with Varig to form a new airline. Other possible partners include the U.S.-based Texas Pacific Group and Brazilian airlines Gol and Ocean Air.

Under Brazilian law, no foreign partner can have more than a 20% stake in a Brazilian airline.

Peru Aims To Sell TANS Airline Stake To Air China-Reports
6 May 2005

LIMA (Dow Jones)--The Peruvian government is promoting the sale of a stake in state-owned airline TANS to Air China Ltd. (0753.HK), reports said.

"We are in preliminary conversations with Air China for this objective," Foreign Affairs Ministry Adviser Mario Roggero was quoted as saying in government newspaper El Peruano on Friday.

Roggero told newspaper Gestion that meetings between Peruvian and Chinese officials took place on April 18 and 19.

He said the negotiations started well, but added that, "There is a long road yet."

Roggero said that the government could sell up to a 70% stake to Air China, while the Peruvian government would reserve the right to eventually sell the remaining portion.

Peru is working to boost tourism from China and to have the Lima airport become a hub for Chinese tourists wanting to visit elsewhere in South America.

"The idea is to capture Chinese tourists, which would not only allow an increase in the transport of people but also of cargo as exports grow, especially of agricultural products, to this country (China)," he told Gestion.

A second meeting, including officials of various Peruvian government departments, could take place next week, he said.

TANS Peru, run by Peru's air force, started providing flights in Peru's jungle regions in 1963. In 1998, the government decided to allow it to fly nationally. It operates a number of flights within Peru.

Peru and Brazil to triple air flights, eye tourism

LIMA, Peru, May 6 (Reuters) - Brazil and Peru have agreed to more than triple the frequency of airline flights between the two South American nations to lift bilateral trade and tourism, Peru's government said on Friday.

The accord signed by aviation authorities of both countries will allow 28 flights a week, up from the current quota of eight per week, which Peru says does not meet demand.

"The pact was signed on Thursday in Lima ... and will give a big boost to tourism and bilateral trade," a Transport and Communications Ministry spokesman told Reuters.

El Salvador's Grupo TACA airline and Brazil's Varig are the only two airlines that fly directly between Peru and Brazil. Chilean flag carrier LAN , which owns Peru's top airline LanPeru, is interested in starting direct flights, a LanPeru spokeswoman said.

Brazil's OceanAir, which last year bought Colombian airline Avianca, said in December it would begin running domestic flights in Peru via its Wayra Peru unit. It is currently waiting for a flight permit from Peruvian authorities.

Bilateral trade between Peru and Brazil is small but both countries want to increase commerce, underlined by plans to build a $700 million highway linking the two countries.

Home to South America's most famous archeological site, Machu Picchu, Peru expects more than a million tourists this year and more than two million in 2010, as visitors flock to enjoy its mountains and rain forest.

Brazil boasts some of the world's most stunning beaches, its annual Carnival and cities such as Rio de Janeiro.

Peru, which wants to become one of the world's most open traders by 2020, has signed or amplified several aviation agreements in recent months with countries including Spain, Thailand, the United Arab Emirates and South Africa.

It is trying to persuade Beijing-based Air China to take a share in small Peruvian state airline TANS.

Brazil Airline Gol Wins 2nd-Place Market Share In April
9 May 2005

SAO PAULO (Dow Jones)--Brazilian no-frills airline Gol Linhas Aereas Inteligentes SA (GOL) secured second place in the domestic market in April, just four years after starting operations, according to government statistics released late Friday.

Gol secured 27.8% of market share in the domestic market in April, overtaking its closest rival, Viacao Aerea Rio Grandense SA (VAGV4.BR), or Varig, which had 27.6% market share in April.

The airline has taken advantage of financial difficulties at Varig to gain market share in recent months, and has also increased capacity, adding three more of Boeing Co's (B) 737 airplanes since the beginning of the year, bringing its total fleet to 32 aircraft.

Gol's participation increased from 26% in March, up from 20% in April 2004.

Varig, on the other hand, has seen its market share fall from 29.9% in March and 30.6% a year ago. The airline, which is Brazil's largest when international services are included, is struggling under a burden of nearly 6 billion Brazilian reals ($1=BRL2.462) of net debt.

Meanwhile, the largest domestic carrier, TAM SA (TANC4.BR), also gained market share in April, securing 42.3% of the domestic market, up from 41.7% in March.

In terms of passengers transported on domestic routes, TAM carried 1.03 million in April, while Gol carried 680,074 in the same period and Varig carried 675,373.

The total number of passengers carried by Brazilian airlines on domestic routes in April was 2.4 million, up from 2.1 million in the same period of 2004.

Meanwhile, in international flights Varig maintained its leadership with 82.2% of market share in April, but down from 88% of market share seen a year ago.

TAM, on the other hand, is picking up its participation in international services, with a market share of 15.8% in April, up from 12% seen a year ago.

In mid-morning trading, Gol's preferred shares were up 0.18% at BRL38.81. Gol is scheduled to release first quarter results on Tuesday before markets open.

Brazil Airline Varig Appoints New Board, Chief Executive
9 May 2005

SAO PAULO (Dow Jones)--Shareholders of Brazil's largest airline Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, have appointed a new board of directors and chief executive, Varig said in a statement Monday.

The new board, formally appointed on Saturday, will be led by the new chairman, David Zylbersztajn, and deputy chairman, Omar Carneiro da Cunha Sobrinho.

The new board's first action was to appoint Henrique Neves as chief executive of the company, replacing Carlos Luiz Martins, according to the statement.

The board reshuffle is designed to help find a solution to Varig's debts, which are estimated at around 6 billion reals ($1=BRL2.45), including the possible sale of the airline to a new strategic partner.

The shareholders also appointed Marcos Castrioto de Azambuja, Eleazar de Carvalho Filho, Brigadier Sergio Xavier Ferolla and Sergio de Almeida Bruni as directors.

Gesner de Oliveira and Harro Fouquet are the two remaining survivors from the previous administration.

The distraction of its financial problems has started to affect the company's operating performance. Varig has been losing domestic market share and in April it was overtaken for the first time by start-up airline Gol Linhas Aereas (GOL), according to the government's civil aviation department, or DAC.

The board was scheduled to travel to Brasilia on Tuesday to meet with government officials. Brazil's government is Varig's largest creditor.

Varig's largest shareholder is the Rubem Berta Foundation, which is run on behalf of the airline's employees and has consistently blocked attempts to restructure the company's debts.

In 2004, the foundation blocked the Brazilian government's attempt to merge Varig with Brazil's second-largest airline, TAM SA (TANC4.BR).

A number of investors have expressed interest in buying Varig, including Brazilian entrepreneur German Efromovich, who owns the small Brazilian airline Ocean Air and Colombia's flagship airline Avianca.

Last week, Portugal's Prime Minister Jose Socrates confirmed TAP Air Portugal (TPA.YY) had made an offer to buy a stake in Varig, while the local newspaper O Estado de Sao Paulo reported that U.S.-based Texas Pacific Group (TGP.XX) was looking to buy the airline.

Sao Paulo-Dubai flights to take off by year's end: Brazil

BRASILIA, May 10 (AFP) - Brazil's foreign affairs ministry announced on the sidelines of an Arab-South American summit here Tuesday that direct flights would soon link the two regions for the first time.

There are currently no direct flights between Brazil and the Arab world.

Authorities in Brazil are hoping the new route, to be flown by Emirates Airways, will boost trade and tourism.

"We invite Arab nations to get to know Brazil as a tourist destination, not only for its sunshine and seaside resorts, but also for the Amazon region ... and the central states," tourism minister Walfrido Mares Guia said.

Mario Vilalva, director of the ministry's business section, noted that officials would assemble a big delegation of business leaders for the inaugural flight, which will take place "sometime between now and the end of the year."

The first Arab-South American summit opened Tuesday in Brasilia, aiming to strengthen political and economic cooperation between the distant regions.

Chile LAN Airlines says April traffic up 14.3 pct

SANTIAGO, Chile, May 10 (Reuters) - Chile's dominant airline, LAN Airlines SA , said on Tuesday its passenger traffic rose 14.3 percent in April compared with the same month last year, on strong demand in Latin America, increased capacity on long-haul routes and new routes.

The airline said international passenger traffic jumped 18.7 percent for the month, while domestic passenger traffic fell 7.3 percent due in part to an earlier Easter holiday.

LAN's cargo traffic rose 19.8 percent in April, mostly due to strong growth in exports from South America during the period.

Brazil's Gol eyeing flights to Bolivia, Uruguay

RIO DE JANEIRO, Brazil, May 10 (Reuters) - Brazil's Gol airline plans to start flights to Santa Cruz de la Sierra in Bolivia next month and hopes to extend its international service to other neighboring countries by year's end, its president said on Tuesday.

"This year we should get to Uruguay and Paraguay," Gol President Constantino de Oliveira Junior said on a teleconference with analysts.

Gol Linhas Aereas Inteligentes, whose discount fares and low-cost service have proved highly popular with Brazilians, already flies to Buenos Aires.

Last month, it overtook Varig to become the country's second-most-popular airline, with 27.8 percent of the domestic market. TAM is still number one domestically, with a 42.30 percent market share.

Earlier on Tuesday, Gol reported a first quarter net profit of 111 million reais, up 64 percent from a year earlier.

The company also increased its revenue targets for the year to 3 billion reais from 2.8 billion reais and raised its earnings per share estimate to between 2.85 reais and 3.15 reais per share from 2.70 reais and 3 reais per share.

Oliveira added on the teleconference that Gol expected its seat offering to grow 24 percent a year until 2009, with its fleet growing to 70 aircraft from the current 30, most of them Boeing 737-800s.

Gol's shares ended down 0.54 percent at 38.69 reais on Tuesday, performing better than a 2.76 percent drop by the Sao Paulo market's benchmark Bovespa index.

Peru Gives Venezuela's Aeropostal Rights For Routes
11 May 2005

LIMA (Dow Jones)--The Peruvian government said Wednesday it had granted a four-year permit for Aeropostal - Alas de Venezuela CA to operate passenger and cargo flights between Venezuela and Peru.

In a statement in the official gazette, the Director General of Civil Aviation said the privately held airline will be able to operate regular flights between Caracas and Lima, with stops in Ecuador and Colombia.

The airline was once owned by the Venezuelan government, but was sold to the private sector, beginning flights in early 1997.

Aerolineas Argentinas To Start Peru Subsidiary -Reports
13 May 2005

LIMA (Dow Jones)--Argentine airline Aerolineas Argentinas plans to start a subsidiary in Peru, to be known as Aerolineas del Peru, various reports said Friday.

The initial investment will be $10 million and flights will start as soon as legal requirements are met, company president Antonio Mata told newspaper El Comercio.

He estimated that local flights could start within three or four months, and international flights by the end of the year.

Aerolineas Argentina, controlled by Spain's Marsans group, would initially take 49% of the local subsidiary, while the rest will be owned by local investors.

A unit of Chilean airline Lan (LFL) is the largest airline in Peru, but a recent bout of bad publicity - tied to an inflight video showing Lima as a squalid, poverty-stricken city - has increased calls from various Peruvian politicians for greater competition in the airline sector.

Lan apologized for the showing of the almost decade-old inflight video on various flights.

"The project to set up Aerolineas del Peru was programmed for 2006, but in light of the tense relationship between the Peruvian people and the largest operator in the market, an opportunity has opened up in the market," Mata was quoted as saying.

Various other airlines are reported to be interested in tapping into Peru's vibrant tourism market.

The Peruvian government is also promoting the sale of a stake in state-owned airline TANS to Air China Ltd. (0753.HK). reports have said.

Brazil's Airline Gol 1Q Net Profit BRL131.1M VS BRL90.7M
10 May 2005
Dow Jones


Gol Linhas Aereas Inteligentes SA - Sao Paulo (GOL)
Consolidated results, figures in Brazilian reals

Three months ended March 31, 2005

2005 2004
Net Revenue BRL589.2 mln BRL433.1 mln
Ebitdar* 235.9 mln 187.5 mln
Ebitdar margin 40.0 % 43.3 %
Net Profit 131.1 mln 90.7 mln

($1=BRL2.45)

*Earnings before interest, taxes, depreciation, amortization and aircraft rent expenses

SAO PAULO (Dow Jones)--Brazilian no-frills airline Gol Linhas Aereas Inteligentes SA (GOL) Tuesday reported higher net profits for the first quarter of 2005, as the firm added new aircraft and transported more passengers. This gain was partly offset by higher fuel prices.

Gol reported a net profit of 131.1 million Brazilian reals ($1=BRL2.45) for the first quarter, slightly higher than markets had been expecting. The figure was up 44.6% from BRL90.7 million a year ago, and 5.8% higher from BRL123.9 million in the fourth quarter of 2004.

The airline, which started operations in January 2001, added three more of Boeing Co.'s (BA) 737 aircraft during the quarter, bringing the total fleet to 30 aircraft at the end of March.

As a result, the company increased the capacity available on its network, calculated as the number of available seat kilometers, to 2.73 million during the quarter, up 27.2% from 2.14 million a year ago.

Utilization of that capacity increased faster, with the number of kilometers flown by passengers rising to 2 million, up 29.7% from a year ago, driving the aircraft utilization rate, or load factor, to 73.4% during the quarter, up from 72% a year ago.

More passengers translated into higher net revenues of BRL589.2 million for the first quarter, up 36% from BRL433.1 million a year ago, though revenues were flat from the fourth quarter. [ 10-05-05 1228GMT ]

Operating revenue per available seat kilometer rose 6.9% to BRL0.216 during the quarter, Gol said in a statement.

Earnings before interest, tax, depreciation, amortization and aircraft rent costs, or Ebitdar, totaled BRL235.9 million during the quarter, up 25.8% from a year ago. The Ebitdar margin was 40.0% of net revenues, down 3.3 percentage points from 43.3% a year ago.

The higher revenues were partly offset by higher costs, Gol said. The company reported that costs per available seat kilometer totaled BRL0.151 during the quarter, up 8.8% from a year ago, primarily due to higher fuel prices and the expansion of operations.

Total operating costs were BRL411.9 million during the quarter, up 38.5% from a year ago.

Fuel prices rose 41.1% per liter during the quarter, due to the higher cost of international crude oil, partly offset by the 7.8% appreciation of the Brazilian real during the period.

Aircraft rent costs fell 13.9% to BRL0.190 per available seat kilometer, as the company maintained its high aircraft utilization rate, flying on average 14 hours per day. Rental costs were also helped by the stronger Brazilian currency, Gol said.

The airline ended the quarter with short-term debt of BRL109.4 million, down 7.5% from a year ago. The company's net cash position was BRL646.3 million, down 11.6% from a year ago, primarily due to BRL93.4 million payments to Boeing for firm orders of new aircraft.

Gol said it plans to add six new aircraft during the second quarter, and four more in the second half of the year, bringing total fleet capacity to 40 aircraft by year end.

Most of these will be the larger 737-800 aircraft, each with 177 seats, translating into a 50% increase in the number of seats available at year-end compared with the end of 2004, Gol said.

The company plans to start a new international flight to Santa Cruz, Bolivia, in June and Montevideo, Uruguay and Asuncion, Paraguay in the second half of the year.

Gol began international operations in December, with a flight to Buenos Aires, Argentina, which the company said achieved profitability in the first full month of operations. Approximately 70% of passengers on those flights in the first quarter were Argentine, and over 90% of bookings were done over the internet, the firm said.

Gol said it expects demand for air transportation in Brazil to remain strong in 2005, driven by low fares and underlying economic fundamentals.

As a result, the company increased its guidance for full year net revenues to BRL3 billion, from BRL2.8 billion previously, with earnings per share of between BRL2.85 and BRL3.15, from BRL2.70 to BRL3.00 before.

The Ebitdar margin for the full year is expected to be the same, at between 38% to 40%, while the operating margin was nudged upward to 27% to 29%, from 26% to 28% previously.

Varig to Hold Talks on Rescue Plan Terms
By ALAN CLENDENNING
16 May 2005

SAO PAULO, Brazil (AP) - Brazil's flagship airline Varig is negotiating terms of a rescue plan with Portugal's state-owned airline to prevent the South American carrier from getting crushed by debt, the companies said Monday.

Under the deal being discussed, TAP Air Portugal would invest an undisclosed sum in Varig and get a stake of up to 20 percent in the Brazilian carrier, though the two airlines would not merge, TAP said.

The negotiations are expected to last three weeks and are aimed at reaching an agreement for an alliance allowing the companies to cut costs and "remain independent, while capturing the countless synergies that may become real," TAP chief executive Fernando Pinto said in a statement.

Varig ran advertisements in major Brazilian newspapers Monday announcing that the talks were under way, but an airline spokesman repeatedly declined comment on Pinto's remarks regarding the specifics of what TAP wants to achieve with the negotiations.

Both companies have overlapping trans-Atlantic routes between South America and Europe, and already have a code-sharing agreement on some flights.

TAP is trying to clinch the deal for a much tighter relationship because "a new opportunity was created pointing at the possibility of attempting to establish a strategic positioning in South Atlantic," Pinto said.

Any deal with Varig will be complicated because the airline comes loaded with debt of 9.5 billion reals ($3.8 billion) and has steadily lost domestic market share.

Also, Varig's controlling shareholder -- the nonprofit Rubem Berta Foundation representing airline employees -- has repeatedly refused to relinquish control during previous attempts at restructuring.

But Pinto said TAP agreed to negotiate with Varig only after the foundation said it intends "to hand over its shareholding control in the company."

Under Brazilian law, foreign companies are not allowed to hold more than 20 percent of Brazilian airlines. Pinto told Portugal's TSF radio that "it is TAP's goal to get those 20 percent."

He added: "There is no possibility of TAP merging with Varig, there will only be a participation in the company."

The foundation warned in the newspaper ads that no deal has been reached and that the talks could fall apart. The announcement about the TAP-Varig negotiations came after Varig received a flurry of interest from possible suitors, including U.S.-based private equity group Texas Pacific Group and Brazilian airline Ocean Air.

Any deal involving heavy foreign investment in Varig or management control of the airline by a foreign company will be sensitive, because the airline has always been in Brazilian hands since it was founded in 1927 and is a source of deep national pride.

But Pinto is Brazilian, and a former Varig chief executive who led the Brazilian company as recently as 2000.

Varig incurred much of its debt after the Sept. 11, 2001, attacks prompted a big decline in air travel, and a depreciation of the Brazilian currency in 2002 forced it to pay more for dollar-linked costs like fuel and aircraft leasing payments.

The airline is expected to partially reduce its debt with proceeds from a December court decision giving it 2 billion reals ($800 million) in damages for losses from government-imposed price controls on airline ticket prices in the late 1980s and early 1990s.

Varig is Brazil's largest carrier in overall domestic and international flights, with nearly 100 planes flying across Brazil and to 27 destinations abroad, but it recently fell to the No 3. spot for flights within Latin America's largest country amid stiff competition. Air Portugal flies to 42 destinations in 25 countries and is that country's leading airline.

Brazilian officials last December floated the idea of a state takeover of Varig to restructure the company, but later decided that a market solution is best for the airline.

Vice President Jose Alencar has said the government supports a plan for Varig debt to be turned into equity as part of a rescue plan, with creditors ending up owning a big chunk of the airline. He is seeking support from the Defense Ministry, which oversees civil aviation.

Portuguese Transportation and Communications Minister Mario Lino expressed confidence that a deal will be sealed to save Varig and help TAP.

"TAP has a part to play and I am happy about the advances in negotiations," Lino told reporters.

Aerolineas Argentinas on guard for LAN's arrival
By Cesar Illiano and Damian Wroclavsky

BUENOS AIRES, Argentina, May 18 (Reuters) - Argentina's flagship airline, Aerolineas Argentinas, is armed and ready for a good fight.

Antonio Mata, president of the carrier acquired by Spain's Marsans group in 2001, said his firm will defend its turf from newcomer LAN Argentina, affiliate of Chile's successful LAN Airlines , when it begins operations on June 8.

"We're not going to let anyone displace us easily," Mata told Reuters in an interview on Wednesday.

The Spanish executive has brought the airline back from near bankruptcy and expanded operations while a host of smaller competitors dropped by wayside. Aerolineas now has 90 percent of the domestic flight market.

Mata warned, however, that the battle could get ugly if the Chilean rival does not work the less-profitable domestic routes and focuses solely on high cash-earning flights.

"The government has given me its guarantee that it won't let any new operator install itself in the country without attending to social demands for routes in regions where there are losses ... If these aren't distributed proportionally, then obviously there are going to be problems," he said.

Argentine airline regulations do not force companies to fly specific routes but the government is keen on guaranteeing air links for sparsely populated, remote regions from icy Patagonia to the northern jungles.

Mata said his firm would exploit what he calls its "commitment to the country" to gain the upper edge against its competitor in public opinion.

"They (LAN) consider Argentina a market. We consider it our country, our homeland," said Mata, stressing that Aerolineas has a long history linking it to the Argentine people.

EVITA'S SHROUD

Mata himself has gone to great lengths to build affinity with the Argentines. Last year he bought the funeral shroud of Evita Peron in an auction and donated it to the Argentine Congress in an emotive ceremony.

LAN, on the other hand, has irked nationalists by referring to "Falklands" instead of "Malvinas" for the British-ruled South Atlantic islands Argentina claims as its own.

Aerolineas is one of Argentina's 20 largest companies with over 50 airplanes -- LAN Argentina will have two planes initially and build up to 12 by year-end. Last year, Aerolineas posted earnings of $49 million, matching the 2003 profit as higher oil prices offset a 40 percent jump in sales.

This year, the carrier expects a 20 percent rise in sales to 3.2 billion pesos ($1.1 billion) on expectations that demand for air travel will grow 19 percent as the economy recovers from a grueling four-year recession.

Meanwhile, LAN Argentina told Reuters on Tuesday it aims to grab a 14 percent market share this year, initially with domestic flights and expanding to international routes in a second phase.

The targeted market share is equivalent to the percentage left unattended by the state-run airline Lafsa in conjunction with Southern Winds, which has reduced operations amid a cocaine trafficking scandal.

LAN Argentina will absorb 800 LAFSA employees.

Marsans created a new airline in Peru and has similar plans for other Latin American countries with the aim of becoming the region's No. 1 airline in five years.

After having lived through Argentina's traumatic economic crash in 2001-2002, Mata considers himself a veteran in a country where foreign investors frequently complain of unstable government rules.

"I've seen it all. I've been in Argentina for four years and nothing surprises me anymore. That's why I say, let LAN Chile come, let them come but they should come to work for real."

Brazil Airline Gol Gets OK For 2 New International Routes
19 May 2005

SAO PAULO (Dow Jones)--Brazilian no-frills airline Gol Linhas Aereas Inteligentes SA (GOL), has received authorization to operate more two regular international flights, the company said Thursday.

Brazil's Commission for International Air Navigation Studies, or Cernai, has given Gol permission to fly to Montevideo and Asuncion, the capitals of Uruguay and Paraguay, respectively.

Gol said it expects to begin operating the new routes in the second half of 2005.

"Launching flights to both countries is part of Gol's expansion plan in South America," the company said in a statement.

Cernai has also authorized Gol to add 26,694 regular seats per month in its flights to Argentina, Gol's first international destination, launched in December 2004.

The airline is also planning to launch services to Santa Cruz, in Bolivia, in June.

Gol has grown robustly since launching operations in 2001, and has said it will add approximately 13 leased aircraft this year, all from Boeing Co.'s (BA) 737 family, to end the year with a fleet of about 40 aircraft.

In April, just four years after starting operations, Gol secured second place in the domestic market - overtaking its closest rival, Viacao Aerea Rio Grandense SA (VAGV4.BR), or Varig.

On the financial side, the company recently posted a net profit of 131.1 million Brazilian reals ($1=BRL2.46) for the first quarter, up 44.6% from BRL90.7 million a year ago.

Turkish Airlines To Operate Between Prague And Buenos Aires
Luis Zalamea
20 May 2005
Aviation Daily

Argentina authorized Turkish Airlines to start passenger and cargo operations between Prague and Buenos Aires with as many as seven weekly frequencies using Airbus A330s and traffic rights for intermediary destinations, plus unlimited cargo frequencies.

Details were worked out earlier this week at meetings in Buenos Aires led by Argentina's Undersecretary of Transportation Ricardo Cirielli and his Turkish counterpart, Oktay Erdagi.

Brazil Varig, Portugal TAP See Shr Deal In 3 Wks -Reports
19 May 2005

SAO PAULO (Dow Jones)--Brazil's largest airline, Viacao Aerea Riograndense SA (VAGV4.BR), and Portugal's TAP Air Portugal (TPA.YY) expect to reach an investment deal in three weeks, Brazilian newspapers reported Thursday.

TAP may take up to a 20% stake in Varig, and may also help Varig find more investors interested in the Brazilian airline, Varig's chairman, David Zylberstajn, said after meeting Wednesday with Brazil Vice President Jose Alencar.

Earlier this week, Varig and TAP confirmed they are negotiating a capitalization plan for heavily indebted Varig.

Varig has suffered severe financial difficulties since the airline industry went into recession worldwide in 2001. Varig's net debt is estimated at about 6 billion reals ($1=BRL2.44).

Zylberstajn was appointed last week, along with a new board of directors and a new chief executive, to find a solution to the airline's debt problem and to negotiate with companies interested in capitalizing the company.

Under Brazilian law, no non-Brazilian company can own a majority stake in a Brazilian airline, however.

A number of domestic investors have expressed interest in buying Varig, including Brazilian entrepreneur German Efromovich, which owns the small Brazilian airline Ocean Air. Efromovich recently purchased a controlling stake in Colombia's flagship airline, Avianca.

Brazil Airline TAM To Add 20 Firm Orders For Airbus A320s
25 May 2005

SAO PAULO (Dow Jones)--Brazil's largest domestic airline, TAM SA (TAMM4.BR), is looking to place another 20 firm orders for aircraft with Airbus (ABI.YY), local financial daily Valor Economico reported in its Wednesday edition.

The company is in "final negotiations" to buy 20 of Airbus' A320 aircraft, the newspaper said, quoting TAM President Marco Antonio Bologna.

The 20 planes are currently options from a previous agreement signed in July 2004, under which TAM placed firm orders for 10 A320s. Those 10 aircraft are scheduled to start arriving this year, with deliveries continuing over the next four years.

TAM was not immediately available to comment when contacted Wednesday.

Local press have previously reported that TAM plans to use the larger A320 aircraft to ramp up its international operations.

Earlier this month, TAM unveiled plans for primary and secondary offerings of stock, and the company's share of the proceeds would be used to buy the aircraft, according to the report.

TAM will offer a total of 30.2 million shares to the market, with 21.1 million through the issue of new shares, and 9.1 million through a secondary offering by existing shareholders.

Based on TAM's estimated price range of between 18.00 Brazilian reals ($1=BRL2.44) and BRL23.00 per share, the company can expect to raise up to BRL485 million to pay for the A320s.

TAM, with 42.3% of the domestic market in April, is Brazil's largest domestic airline, according to government statistics.

The company posted a first-quarter profit of BRL53.5 million, more than triple the BRL16.9 million seen in the same period a year ago.

- By Rogerio Jelmayer and Matthew Cowley, Dow Jones Newswires

Brazil Airline Gol Keeps '05 Guidance Despite Competition
01 June 2005

SAO PAULO (Dow Jones)--Brazilian no-frills airline Gol Linhas Aereas Inteligentes (GOL) Wednesday reaffirmed its financial guidance for 2005, despite intense price competition in the second quarter, and said it's optimistic for the second half of the year.

Passenger traffic increased 46% during May, compared with a year ago, while the company's fleet capacity increased 42% with the addition of new aircraft, Gol said in a statement.

The airline filled more than 70% of its aircraft seats during May, the highest load factor in the Brazilian airline industry, it said.

Gol acknowledged that yields, or the amounts paid by each passenger for each kilometer flown, suffered because of "aggressive" fare promotions and the appreciation of the Brazilian real.

Price competition has increased primarily because of the end of the code share agreement between TAM SA (TAMM4.BR) and Varig (VAGV4.BR) at the beginning of May, Gol said.

The strengthening of the real harms revenues because a significant proportion of the firm's costs, including aircraft leasing and jet fuel, are linked directly or indirectly to prices in U.S. dollars.

However, Gol said it expects costs to remain the same during the second quarter despite jet fuel costs 20% higher than a year ago.

The airline, which launched operations in 2001, ended May with 33 of Boeing Co's (BA) 737 aircraft in operation, and 34 in the fleet.

Furthermore, "advance bookings for the third quarter indicate that Gol traffic growth is above expectations," the firm said.

"Despite the yield environment facing the industry in the second quarter of 2005, we anticipate solid third and fourth quarters," the firm said.

Gol confirmed full-year 2005 guidance with net revenues of approximately 3 billion reals ($1=BRL2.41), up 53% from 2004. The company said it expects earnings per share of between BRL2.85 and BRL3.15, up 40% from last year.

The firm said earnings before interest, tax, depreciation, amortization and aircraft rental costs will be approximately 38% to 40% of net revenues, with an operating margin of approximately 27% to 29%.

Brazil's Government OKs TAP Plan for Varig
2 June 2005

BRASILIA, Brazil (AP) - Brazil's government has tentatively approved a plan for Portugal's state-owned airline to take a 20 percent stake in Brazilian flagship carrier Varig to prevent the South American company from collapsing under a mountain of debt, executives said Thursday.

The approval is not formal, but Varig Chairman David Zylberstajn and TAP Air Portugal Chief Executive Fernando Pinto said senior government officials agreed in principle to their rescue plan for Varig after a three-hour meeting.

No financial details were disclosed, but Pinto told reporters after the meeting that "there's a lot of money involved, no doubt."

"Our plan will be revealed over time," he said. "But the volume of capital that will enter Varig in the near future will be very large."

The airlines have been negotiating for weeks, but the Brazilian government's blessing was crucial because it is Varig's largest creditor.

Both TAP and Varig have said the deal will not be a merger, calling the arrangement an alliance. Analysts say such an arrangement would allow the two carriers to consolidate identical trans-Atlantic routes, expand their existing code sharing agreement and get better deals on purchases ranging from jetliners to fuel.

Varig, whose full name is Viacao Aerea Riograndense SA, has debt of 9.5 billion reals ($4 billion).

Much of it was incurred after the 2001 terror attacks prompted steep declines in air travel, and a depreciation of the Brazilian currency in 2002 forced it to pay more for dollar-linked costs like fuel and aircraft leasing payments.

Argentina Austral To File Complaint Vs Govt On Lan Routes
3 June 2005

BUENOS AIRES (Dow Jones)--Austral, a subsidiary of Argentine flagship carrier Aerolineas Aerolineas (AR.YY), will pursue legal action against the government for granting two Buenos Aires-Montevideo routes to the Argentine unit of Chile's Lan (LFL).

Austral said in a Friday press statement that it plans to file a g/igv complaint against the Undersecretariat of Commercial Air Transport for "unequal treatment in granting routes" to Aero2000, the local company that is 49% owned by Lan.

According to Austral, the government resolution granting the two routes in question to the company explicitly forbids "the incorporation of new transporters" and "considers the incorporation of a new concessionaire for the Montevideo route inconvenient for the time being."

Austral was awarded the Buenos Aires-Montevideo-Asuncion and Buenos Aires-Montevideo-Posadas routes in December 2003 after a public tender. Last month, the government granted a 15-year concession for a Buenos Aires-Montevideo route to Aero2000 without a public hearing process.

Lan arrived in Argentina in March, absorbing workers from former state-owned airline LAFSA and guaranteeing operations at bankrupt private carrier Southern Winds for 90 days. The Chilean company's entrance into the country was met with resistance from some industry players and lawmakers, who said Aero2000 was nothing more than a paper company that allowed Lan to meet a local ownership requirement. Aero2000 had no routes, airplanes, significant staffing or other operations before it was acquired by the Chilean carrier.

Aerolineas Argentinas has had a long-running feud with the Undersecretary of Commercial Air Transport, Ricardo Cirielli, a former union leader who led months of strikes and airline protests. The government owns a 1.34% stake in Aerolineas Argentinas and has asked the courts to reject the company's 2003 financial results, a case that is still pending.

TAP-Portugal restructuring plan for Varig to take up to six months: report

LISBON, June 3 (AFP) - A rescue plan which TAP-Portugal has tabled for troubled Brazilian flagship carrier Varig, tentatively approved by Brasilia, will take up to six months to be completed, TAP-Portugal president Fernando Pinto said in comments published Friday.

TAP will not inject capital directly into Varig under the plan, which will see the Portuguese carrier take a 20 percent stake in the Latin American company, he added.

"Money will not come out of TAP," the Portuguese business daily Diario Economico quoted Pinto, a one-time president of Varig, as saying in Brazil.

Instead TAP would coordinate the financial operation which will involve several investors with the Portuguese airline also providing planes to Varig in an effort to boost its capitalization, he said.

Pinto and Varig chairman David Zylberstajn said Thursday in Brazil that senior Brazilian government officials had agreed in principle to their rescue plan for Varig following a three-hour meeting.

As the Brazilian government is the main creditor of heavily-endebted Varig, its approval of the plan is key.

Pinto gave no further details of the plan, saying only that they would be revealed at the right moment.

Last month TAP and Varig signed a memorandum of understanding under which the Portuguese firm can directly or indirectly acquire a stake of up to 20 percent of Varig, the maximum allowed a foreign company by Brazilian law.

Varig, one of Latin America's largest airlines, is on the verge of collapse from a debt load that stood at around 2.3 billion dollars (1.9 billion euros) at the end of last year.

The rescue plan would allow teh two airlines to expand their existing code share agreement, negotiate better deals from suppliers and consolidate their routes betwen Portugal and Brazil, a Portuguese colony until the 19th century.

TAP offers some 40 weekly flights from Portugal to Brazil and relies on Varig to offer its passengers connecting flights within the Latin American country.

The Portuguese carrier is the European airline with the most flights to Brazil and wants to become a hub for travel from the continent to the country, which is becoming an increasingly popular destination for European tourists.

TAP and Varig are members of the Star Alliance, the world's largest airline partnership, which is led by Germany's Lufthansa and United Airlines.

Brazil's Varig Airline Reorganization Faces Debt Dilemma
By Tom Murphy
6 June 2005

SAO PAULO (Dow Jones)--Brazil's traditional flagship airline, Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, still faces a major debt dilemma as part of its reorganization, analysts and officials said Monday.

Last week, Varig announced that it had signed a memorandum of understanding with Portugal's TAP Air Portugal (TPA.YY) on ways for the Portuguese company to aid the financially stricken Brazilian carrier.

However, a meeting involving Varig, TAP and top government officials on Thursday didn't result in any solution to Varig's debt problem.

Varig's total debt is equal to about 9 billion Brazilian reals ($1=BRL2.47). Varig owes about BRL2.5 billion of that total to the Federal Tax Authority and to the Federal Airport Authority.

In 2004, Varig won a federal appeals court decision awarding it BRL2.5 billion in damages from the federal government for losses from government price control policies in the 1990s.

At Thursday's meeting, Varig and TAP executives appealed to Finance Minister Antonio Palocci to "marry up" Varig's BRL2.5 billion in government-held debts with the BRL2.5 billion court award. However, Finance Ministry officials said Palocci rejected the appeal, saying the federal government was still in the process of appealing the court decision.

"I think the federal government will eventually give Varig a break," said Pedro Galdi, an airline industry analyst for the ABN-Amro Bank subsidiary in Brazil. "It's a fact that, if Varig were to go under, its rivals would not have the scale to be able to take over all of its routes."

Finance Ministry officials said Palocci was unwilling to cancel the government's appeal in the price control case because of the administration's commitment to fiscal austerity.

Meanwhile, TAP is holding back on announcement of any specific plan for aiding Varig. Press reports have said TAP will take a 20% stake in Varig and then supply a major infusion of capital. However, the same reports said TAP would like to have some government help in handling Varig's huge debts.

A spokesman for Varig noted that the memorandum of understanding between the two companies didn't represent "a final deal with TAP," but merely the beginning of formal talks.

Varig's problems began with the airline industry recession in 2001.

The company's latest attempt to reorganize did nothing to help its market share. According to Brazil's Civil Aviation Department, or DAC, Varig's share of the domestic market declined in May to 26.9% from 27.6% in April.

Domestic rival TAM was the big winner against Varig in May. TAM hit a market share of 43.2% in May, up from 41.8% in April.

Despite Varig's troubles, prospects for the market as a whole are improving.

"Brazil's economy is growing," said Galdi. "The industry will expand."

DAC's May figures showed a rise of 14% in domestic passengers from a year ago and an increase of 6.3% in international passengers from May of last year.

Chile LAN Airlines says May traffic up 18.9 pct

SANTIAGO, Chile, June 10 (Reuters) - Chile's dominant airline, LAN Airlines SA , said on Friday its passenger traffic rose 18.9 percent in May, compared with the same month last year.

The airline said international passenger traffic rose 22.3 percent for the month, while domestic passenger traffic fell 0.4 percent amid changes in schedules.

LAN's cargo traffic rose 4.0 percent in May.

Chile, Spain Agree To Double Weekly Flight Frequency
9 June 2005

SANTIAGO (Dow Jones)--Chile and Spain reached a provisional agreement to double weekly flights between the two nations to 28, Chile's Transportation and Telecommunications Ministry said Thursday in a statement published on its official Web site.

Currently, each nation has seven weekly flights to the other country.

"Of the seven new frequencies, four go into effect immediately and the other three in October 2005. They all include the fifth freedom right, which includes the possibility of continuing the flights on to a third-country destination," the ministry said in the statement.

As part of the pact, the Jac civil aeronautics board approved Spanish airline Air Madrid's request to operate three weekly flights between Madrid and Santiago.

Lan Airlines SA (LFL), Chile's biggest airline, strongly supports the government's efforts to liberalize international air traffic to gain access to new markets.

Chile already has reached open-skies agreements with 31 other nations, including the U.S., and is negotiating such a pact with the European Union.

Ministry Web site: http://www.moptt.cl

Bolivia's Airport Workers Call For Strike
9 June 2005

(Dow Jones) The economy of crisis-ridden Bolivia may take another beating as its air traffic is likely to be reduced after workers at the country's airport administration and services authority, Aasana, called for a strike, the Bolivian news Web site Bolivia.com said Thursday.

Omar Alcon, a leader of Aasana employees, said the national directory of the Aasana workers union had decided to call for an indefinite strike at all airports in the country starting midday Thursday. The strike would be in support of protests across Bolivia demanding a nationalization of its oil and gas industry, and a constitutional assembly to reshape the country.

Officials at Aasana contacted by Dow Jones Newswires couldn't be reached for comment.

It wasn't immediately clear, if or how much air traffic had been affected Thursday.

The strike also aims at rejecting a possible nomination of current Senate leader Hormando Vaca Diez, a conservative lawyer and land owner, as a replacement for President Carlos Mesa, who announced his resignation Monday, the Web site said.

Bolivia's Congress is set to meet in the country's historical capital Sucre later Thursday to decide whether to accept Mesa's resignation, and choose a successor. Riot police clashed with protesting miners near the site of the planned session, the Associated Press said.

Other parts of the economy have already been harmed by weeks of street protests and road blockades that in recent days have led to shortages of gasoline and food in the country's administrative capital, La Paz.

Radical farmers have also occupied seven small oil fields belonging to Bolivian firm Chaco, in which BP PLC (BP) holds a minority stake, and Spanish-Argentine oil company Repsol-YPF (REP), halting 13% of Bolivia's daily oil output of about 45,000 barrels.

Brazil's TAM Airline Raised BRL543.4M In Apr Share Offers
14 June 2005

SAO PAULO (Dow Jones)--Brazil's largest domestic airline, TAM SA (TANC4.BR), raised 543.4 million Brazilian reals ($1=BRL2.449) through primary and secondary shares offers made in April, the company announced Tuesday.

TAM said that it offered a total of 30.190 million shares during the month, with 21.133 million through an initial public offering and 9.057 million through a secondary offer.

The company said that it sold shares at a price of BRL18.00 each. The price announced was in line with with the company's original forecast of between BRL18.00 and BRL23.00 per share. TAM will debut its new shares on the market later Tuesday.

The secondary offer represents the sale of a stake in investment funds managed by Credit Suisse First Boston (CSR), which owns about 26.5% of Tam's total capital. The primary offer represents the sale of new shares. Currently, the company is controlled by Brazil's Rolim family, which holds 73%.

The shares were sold in Brazil and also to qualified investors in the U.S. under 144A rules. Tam's shares are listed on Level 2 of Sao Paulo's Bovespa stock exchange, which has stricter corporate governance requirements than the exchange's basic listing.

UBS Investment Bank (UBS), Banco Pactual, and Unibanco (UBHD3.BR) coordinated the offering. TAM, with 43.2% of the domestic market in May, is the Brazil's largest domestic airline, according to government statistics.

The company posted a first-quarter profit of BRL53.495 million, more than triple the BRL16.945 million in the same period a year earlier.

Brazil TAM Airlines In 'Final Talks' To Buy 20 Airbuses
14 June 2005

SAO PAULO (Dow Jones)--Brazil's largest domestic airline, TAM SA (TANC4.BR), is in "final talks" aimed at buying 20 airplanes from Airbus (ABI.YY), TAM President Marco Antonio Bologna said Tuesday.

"We expect to make an announcement within the next few weeks," Bologna said at a news conference. He said the deal would also likely include options for an additional 20 aircraft from Aribus.

Bologna said TAM was looking at the A319 family and the A320 family of Airbus aircraft.

Bologna said, "The aim is to have these planes coming on stream as we renovate our existing fleet. The renovation must take place between 2007 and 2010."

Chile Airline Lan Receives 27 New Routes To Brazil
20 June 2005

SANTIAGO (Dow Jones)--Chilean airline Lan SA (LFL) has gained rights to fly 27 new routes to Brazil, civil aviation authority JAC said Monday.

Lan received seven passenger and nine cargo routes free of charge and paid 5 million pesos ($1=CLP580.70) each for the rights to another 11 long-range passenger and cargo routes, the JAC said.

Closely held domestic rival Sky Service SA obtained seven passenger routes.

The two airlines will have rights to the routes for five years, the JAC said.

The authority distributed the routes following an April 15 agreement between Brazil and Chile to increase bilateral air traffic by 35 routes.

Lan seeks an open-skies agreement to deregulate flights between the two South American countries, which would enable it to launch a Brazilian unit.

The carrier operates several airlines beyond its Chilean base, including units in Argentina, Ecuador, the Dominican Republic and Peru.

Brazil's Varig confirms end of negotiations with Portugal's TAP Air
By MICHAEL ASTOR
Associated Press Writer
20 June 2005

RIO DE JANEIRO, Brazil (AP) - A top official at Brazil's debt-laden Varig airlines confirmed Monday that Portugal's TAP Air had ended negotiations to buy a 20 percent stake in the troubled carrier.

Omar Carneiro da Cunha, vice president of Varig's board of directors, told The Associated Press that Varig's filing for bankruptcy protection Friday effectively voided the memorandum of understanding between the two companies.

"We haven't discussed plans for the future, but if they are interested in future discussions we remain open to them," Cunha said in a telephone interview.

Saddled with a debt of 9.5 billion reals (US$4 billion, euro3.3 billion) Varig has been teetering on the brink of insolvency for years and seen its domestic market share dwindle in the face of competition from low-cost carriers.

TAP and Varig had been discussing a plan under which Portugal's state-owned airline would invest an undisclosed sum in Varig and receive a stake of up to 20 percent in the Brazilian carrier.

The companies have overlapping trans-Atlantic routes between South America and Europe, and already have a code-sharing agreement on some flights. The two airlines would not have merged under the deal being discussed.

But Varig filed for bankruptcy protection on Friday to keep a restructuring plan on track and prevent 11 of its 82 jetliners from being seized by a division of American International Group Inc.

Varig obtained a temporary restraining order from the U.S. Bankruptcy Court in the Southern District of New York to prevent its aircraft from being seized overseas.

U.S. aircraft manufacturer Boeing Co. on Monday filed an objection to the restraining order, claiming that Varig's petitions were "deficient" and "premature and thus invalid," Dow Jones Newswires reported.

Boeing said it has 11 current operating leases with Varig, but did not provide financial details.

AIG, which owns the 11 planes that were threatened with seizure, has also opposed the temporary restraining order.

Boeing and AIG claim that aircraft leasing agreements are not included in the Brazilian bankruptcy protection agreement.

Sao Paulo civil court judge Alexander dos Santos Macedo on Monday appointed the accounting firm Exato Assessoria Contabil to perform an audit of Varig and two affiliated airlines: Rio Sul and Nordeste Linhas Aereas.

Despite the legal tangles, TAP reaffirmed its interest in Varig on Monday.

"TAP continues to follow the referred (bankruptcy) process with close attention as it maintains the strategic interests that led it to ponder establishing a profound partnership with Varig," TAP said in a statement signed by Chief Executive Fernando Pinto.

TAP said it now needed to wait for developments in Varig's bankruptcy process.

Varig, whose full name is Viacao Aerea Riograndense SA, had faced a Friday deadline to pay overdue leasing bills for the planes. The filing allows the carrier to keep using the jetliners while a judge mediates details of the airline's rescue plan with creditors, Varig lawyer Sergio Bermudes said.

Varig now has two months to present a recovery plan to creditors and will continue operating as usual, according to Bermudes.

Aecon eyes takeoff via Ecuador
Aims to be back in black through Quito airport project
TIM LAI
22 June 2005
The Globe and Mail

TORONTO -- Construction of a new Quito International Airport should begin in about three months, and Aecon Group Inc. hopes its share of the project will help it return to profitability after two years in the red, the company's head said yesterday.

Documents to be signed today in Ecuador mark the final hurdles for the Toronto-based company after years of negotiations.

John Beck, chairman and chief executive officer of Canada's largest public construction company, announced yesterday that the South American signing, along with signatures in New York over the next two weeks, will finalize the deal for Aecon to build the airport in conjunction with Brazil-based Andrade Gutierrez Constructores. Total financing for the project will be about $550-million (U.S.) The airport should be completed in just over four years.

“We are premiere airport builders,” he said at the company's annual general meeting in Toronto yesterday. “The people that are involved with building that airport in Quito are the people that were involved in building” Terminal One of Toronto's Lester B. Pearson International Airport.

Quito's airport is too small to accommodate the current traffic of three million passengers a year and its runway are too short for larger aircraft.

Aecon reported a $41.6-million (Canadian) loss in 2004, mainly because of a $32.7-million tax valuation allowance and weak performance from its buildings segment.

Mr. Beck told shareholders that the company intends to return to the black by scaling back on large civil ventures and focusing on smaller infrastructure projects of $100-million or less. This would reduce the need for joint venture partners and diversify the risk.

Mr. Beck said the company will increase its activity in the oil sands in northern Alberta. Aecon will tap into this market through its processing plants in Fort McMurray and its pipe fabrication and module assembly facility in Edmonton. He forecasts that this area will deliver the strongest growth for Aecon in the coming years.

“Last year, our Edmonton facility generated about $35-million of revenue,” he said. “This year, it's planning to almost triple this output to around $90-million.”

One analyst expects Aecon to recover this year and return to profitability, but expressed some caution.

“We're hoping for a turnaround here,” said Martin Gagel, an analyst with Canaccord Capital Corp. “Last year was supposed to be the turnaround — it started that way, but didn't end that way.”

As Mr. Beck was reassuring investors, one 12-year shareholder expressed frustration with the company's bottom line and lack of dividends — Aecon did not produce one in 2004, nor will it do so in 2005.

Mr. Beck said Canada is experiencing what he described as a “$100-billion infrastructure deficit” because of population growth and the need to replace and repair aging roads, bridges and the like. Aecon will get its share of those projects and profit from the surge of construction, he said.

Brazil Airline Gol Thrills Investors, Challenges Abound
By Matthew Cowley
24 June 2005

SAO PAULO (Dow Jones)--Brazilian airline Gol Linhas Aereas SA (GOL) has survived one year as a publicly traded company, outshining shareholders wildest dreams, but the firm has its work cut out dealing with soaring oil prices, crumbling competition and, not least, its starstruck investors.

The firm's strong equity base puts it in an enviable position to deal with these challenges, said Gol Chief Financial Officer Richard Lark.

"We are the best-positioned player in the market to capitalize on any situation that might arise," Lark said in a telephone interview with Dow Jones Newswires.

There are plenty of scenarios for management and investors to contemplate, offering both risks and opportunities.

Gol's low-cost, low-fare model, based on the success of Southwest Airlines in the U.S., has thrived since it launched operations in early 2001, while a number of financially weaker rivals in Brazil have perished.

Gol's share of the domestic market has risen to 27% over the last four-and-a-half years, and it recently overtook debt-laden Varig (VAGV4.BR), Brazil's flag carrier, to become the number-two domestic player in Brazil.

However, Gol is still some way behind the largest domestic carrier, TAM SA (TAMM4.BR), which has also capitalized on the industry shakeout, securing a more than 43% market share. TAM operates a traditional airline model, with multiple classes, and a recent share issue of its own has freshened up its balance sheet.

For both Gol and TAM, the future of Varig is one of the biggest uncertainties. The firm has just started a court-sponsored restructuring process to resolve some 9.5 billion reals ($1=BRL2.38) of debt which, in theory at least, should lead to a resurgent, restructured airline, probably with a new owner - or bankruptcy.

While it's too early to know what will happen to Varig, Lark said it's hard to envisage Gol buying the stricken airline, because it doesn't fit with the low-cost model.

Instead, the "boring execution" of Gol's business plan, without changing cost structures, is the best way to ensure success, Lark said.

"Our challenge is to keep driving the costs down to maintain competitiveness, and to be able to always have low fares... because that's how you're going to grow the market," Lark said.

Investors Thrilled, Want More Growth

Gol's investors, which include a broad range of emerging market funds, specialist airline funds, Brazilian institutional investors and individuals in both Brazil and the U.S., have been thrilled by the no-frills experiment.

Gol's American Depositary Receipts have risen from $17 when the firm started trading one year ago to peak at $34.50 earlier this year, before slipping back to current levels around $30. Trading in ADRs averages around $10 million per day in New York.

At the beginning of this month, Gol reaffirmed full-year 2005 guidance of net revenues of approximately 3 billion reals ($1=BRL2.41), up 53% from 2004, and earnings per share of between BRL2.85 and BRL3.15, up 40% from last year.

Gol is the fastest growing company within Deutsche Bank's Latin America coverage of transportation and infrastructure and compares favorably with its peers in the low-cost airline industry around the world.

The bank estimates 50% year-on-year revenue growth this year in Brazilian reals, and sees profits growing at 25% a year for the next three years.

"That rate of growth is every bit as good as the low-cost carriers we have seen in Europe, the U.S. and even Asia," said Deutsche Bank analyst Daniel McGoey, who recommends buying the company's stock.

With such fast growth, some hiccups are unavoidable. Gol suffered some delays in deliveries of aircraft from leasing companies earlier this year, partly slowing its expansion plans.

Investment bank Raymond James & Associates downgraded Gol to market perform from outperform earlier this month, cutting its second quarter earnings estimates twice in a month based on lower capacity forecasts.

Nevertheless, the bank said it still believes "Gol will be one of the most profitable airlines in the world" and will "continue to capture market share in Brazil."

Using Credit Quality To Borrow Cheaply

After the initial public offering and a follow-up share sale in May 2005, Gol has about $600 million in equity and $400 million in cash, Lark said.

"We have one of the best balance sheets in the airline industry in the world," Lark said.

That helps keep down capital costs, which is every bit as essential to the low-cost model as keeping down operating costs, Lark said.

Low borrowing costs are especially important in Brazil, where the central bank's base lending rate is a towering 19.75%.

Good credit quality translates into lower borrowing costs, and the firm plans to use loans to start buying its own aircraft, which in turn saves money from the existing leasing contracts.

The low-cost airline has placed 30 firm orders for Boeing Co's (BA) 737-800 aircraft, which will start arriving in 2006, with options on a further 33 aircraft.

The strong balance sheet also allows Gol to protect itself from crude oil and exchange-rate volatility by using hedging mechanisms, an option which companies with weaker balance sheets don't have, Lark said.

That's an advantage as crude oil prices touched a record-breaking $60 a barrel this week. Gol's jet fuel prices have risen 38% over the last year, partly offset by the 24% appreciation of the Brazilian real in the period, Lark said.

The executive played down concerns about oil prices, saying all Brazilian airlines can pass on a large chunk of fuel price rises to its customers, because nearly 70% of them are less price-sensitive business travelers.

However, higher prices could slow the growth rate in the Brazilian airline industry, he said.

Altering Market Growth Dymanic?

Oil aside, Brazil's domestic airline market is expected to grow between 10% and 15% annually for the next few years as economic growth fuels incomes. The industry's expansion appears to have picked up pace, edging up from around two times the growth rate of Brazil's gross domestic product to closer to three times GDP, Lark said.

Gol believes its low-fare policy, specifically designed to attract new customers who have never flown before, is partly responsible for this new dynamic, though Lark said it's too early to know for sure.

The firm has some innovative plans to continue opening up air travel to more Brazilians, such as developing new mechanisms for allowing customers to buy tickets. Credit cards and other traditional forms of payment are often not accessible to many poorer Brazilians.

"There have to be other ways for Brazilians to buy your product, because of the income situation of the country," Lark said.

Gol's international expansion has recently run into some challenges of its own.

The airline has delayed the launch of its second international route, to Santa Cruz, Bolivia, as it waits for the political crisis in that country to settle, with no clear date for starting.

"Bolivia is ready to go. The operational aspects are ready. It's only just waiting for a bit of clear-up on the political situation," Lark said. The launch could take place "any day, but who knows...it could be on hold for a while."

On the other hand, Gol's first international flight, to Buenos Aires, is doing fine. The service launched in December and reached break-even after the first month. The airline plans to add more capacity.

It is also planning to open up routes to Asuncion, Paraguay, and Montevideo, Uruguay, later this year, while for 2006 and beyond, the airline is eyeing new destinations within Argentina, as well as Santiago, Chile, Lark said.

Within three years, international flights will be contributing nicely to Gol's balance sheet. Lark forecast that by then, flights to international destinations could account for 20% of aircraft capacity, as measured by available seat kilometers, up from about 4%-5% today.

Chile's LAN to buy 25 Airbus planes for $750 mln

SANTIAGO, Chile, June 29 (Reuters) - Chile's dominant airline, LAN, said on Wednesday it agreed to purchase 25 A318 and A319 Airbus planes for $750 million as it expands its regional and domestic fleets.

Santiago-based LAN said its board had also authorized the option to buy 15 additional planes.

"The new airplanes will operate flights in Latin America, including domestic routes in Argentina, Peru and Chile, supporting the international growth of the company," LAN said in a statement.

LAN has expanded aggressively in recent years and in May saw passenger traffic rise 18.9 percent compared with the same month last year.

The company said the new planes would be incorporated into its fleet beginning in the second half of 2006 and were meant to help replace its Boeing 737-200's. The company already has 19 of the new, A318 and A319 Airbus planes in its fleet.

Last week LAN was awarded new air passenger and cargo flights to and through the coveted Brazil market.

Brazil Gol To Launch Low-Cost Airline In Mexico
5 July 2005
By Matthew Cowley and Amy Guthrie

SAO PAULO (Dow Jones)--Brazilian no-frills airline Gol Linhas Aereas Inteligentes SA (GOL) said Tuesday it plans to launch a low-cost airline in Mexico in partnership with Mexican group Inversiones y Tecnicas Aeroportuarias SA, or ITA.

The new airline could begin flying in the first quarter of 2006, Gol said in a statement.

The two partners plan to draw up a shareholders agreement in the next few months and will then seek licenses from Mexican authorities, Gol said.

"Through our Mexican partnership we are planning to introduce a low-cost company in Mexico, to contribute to the development of local industry," Gol President Constantino de Oliveira Jr. said in the statement.

Brazilian financial newspaper Valor Economico reported Tuesday that Gol would own 40% of the Mexican venture, while ITA would hold 60%. Gol declined to comment on the report when contacted Tuesday morning.

ITA is the strategic partner of Grupo Aeroportuario del Sureste SA (ASR), or Asur, which operates nine airports in the southeast of Mexico, including the airport at the Caribbean resort of Cancun. ITA is 49% owned by Denmark's Copenhagen Airports A/S (KBHL.KO) and 51% by Mexican businessman Fernando Chico Pardo.

Analysts welcomed the news but said more details would be needed to properly evaluate the plan.

"At first glance, the news is positive for Gol," said Marcio Correia, an analyst at Banco Pactual in Rio de Janeiro. "The Mexican market seems to have all the characteristics that Brazil had when Gol started operations."

According to Gol, Mexico is Latin America's second- largest airline market after Brazil, transporting 30 million passengers per year on domestic and international routes.

The Mexican market seems ripe for Gol's strategy, which, at least in part, uses lower costs to attract customers who normally use bus companies. Gol began services in 2001 and is now Brazil's second-largest domestic carrier, transporting more than one million passengers per month, of which roughly 70% are business customers.

Mexican airlines transport roughly 18 million passengers a year on domestic routes, while an estimated 2.5 billion trips are made by highway, according to the government-run airline holding company Cintra SA (CINTRA.MX). The potential market for domestic air travel in Mexico is 50 million passengers a year, according to Cintra.

Cintra was created by the Mexican government in 1995 to manage the country's main carriers, AeroMexico and Mexicana. Cintra plans to sell at least 51% of each airline by early 2006.

Participants in Mexico's aviation industry took the Gol news in stride, saying the market attracts foreign carriers because it has great potential.

"Only 2% of the population travels by plane, while in countries like the U.S. and Argentina, it's at least 7%," said Marco Antonio Calva, of the National Aviation Workers Union, which represents ground workers for domestic and international airlines operating in Mexico.

"Mexico really hasn't developed this market," he added.

Airfares from "bargain" carriers in Mexico typically charge more than $200 for short round-trip flights, and officials worry that these operators merely cut corners by using old planes and spending less on training of personnel and on maintenance.

"When you're using 35-year-old equipment, how safe can it be?" asked Raul Ojeda, a senator with the leftist Democratic Revolutionary Party who sits on the congressional transport and communications commission.

Mexicana launched a low-cost carrier last week, Click, that flies between Mexico City and eight other cities. Click offers tickets at a 30% discount or more compared with flights offered on the same routes by Mexicana.

The hub-and-spoke network, though, does little to ease traffic in the busy Mexico City airport. "There are lots of niches to explore in Mexico, like point-to-point flights that don't stop in Mexico City," said Carlos Smith, a pilot and Mexico-based aviation consultant.

In Brazil, Gol has added its own variation to the point-to-point system, by including multiple stops across the country, which increases aircraft utilization rates. While this might not work in more sophisticated markets where customers don't want stops or even connections, the strategy has been a success in Brazil's price-sensitive market, analysts said.

However, Mexico industry participants cautioned that it's difficult for low-cost carriers to take flight in that country, since taxes and airport fees add about $100 to the cost of the average domestic round-trip ticket.

Late Tuesday, Gol's shares were down 0.6% at BRL34.60, while the broader Ibovespa index was down 1.5%.

Argentina Airport Operator Cuts Shr Offering To 25% Float
5 July 2005

BUENOS AIRES (Dow Jones)--Local airport operator Aeropuertos Argentina 2000 plans to float 25% of its share capital on the Buenos Aires stock exchange after it locks in a new contract with the government, down from the 33% the company announced a year ago.

Aeropuertos Argentina President Ernesto Gutierrez gave the 25% figure during a Monday event in the southern resort town of Bariloche. He also said the company could cede up to a further 20% stake to the government.

The operator's press office confirmed those figures on Tuesday but emphasized that the government has simply an option to acquire up to 20% of the company, and that such a move is not yet definite. Both the public float and any shareholding changes are subject to Aeropuertos Argentina reaching a fresh contract with the government.

The company runs 32 airports throughout Argentina. Its main shareholder is Corporacion America SA, an Argentine consortium belonging to local businessman Eduardo Eurnekian. Aeropuertos Argentina is seeking fresh capital to finance an investment plan that will be formalized when it signs its agreement with the government.

The administration is renegotiating more than 60 public service contracts. Aeropuertos Argentina officials have said it wouldn't be wholly unexpected for the state to take a stake in the company, since the government has expressed interest in having an expanded role in the utility sector. A "mixed" system has also been proposed for water company Aguas Argentinas.

Brazil's Varig names new president, 2nd since May

RIO DE JANEIRO, Brazil, July 6 (Reuters) - Brazil's struggling airline Varig SA on Wednesday named Omar Carneiro da Cunha president to replace Henrique Neves, who was appointed in May.

Carneiro, currently vice chairman, becomes the eighth president in five years for Varig, which has asked for protection from creditors as it tries to restructure 6.5 billion reais ($2.7 billion) in debt.

Varig Chairman David Zylberstajn, who also was appointed in May, will remain in his current post.

The company's executives and board have frequently clashed over plans to revive the airline, once Brazil's flagship carrier but now vying for second place with discount carrier GO behind market leader TAM.

Jul 12 6:05 PM
Varig Airlines Starts Restructuring Plan

AP - The 60-day period which Varig, Brazil's debt-laden airline, has to present a restructuring plan aimed at recovering its financial health began on Tuesday, local media reported.

The two-month period formally began with the publication Tuesday in the Official Gazette of Rio de Janeiro state of last month's court decision allowing the airline to put together a debt-restructuring plan.

Once its plan is ready, Varig will have an additional four months to negotiate it with its creditors, the Agencia Estado news agency said.

To be implemented, the plan must be approved by 51 percent of the airline's creditors.If approval is refused the company will be declared bankrupt, Agencia Estado said.

Varig's single largest creditor is the Brazilian state. Other creditors include the airline's pension fund, Aerus, as well as firms that lease aircraft to the stricken company, including units of General Electric Co., Boeing Co. and Goodrich Corp., along with International Lease Finance Corp., a unit of American International Group Inc.

Varig officials were not immediately available for comment.

On June 22, a Brazilian court accepted Varig's petition to begin a financial restructuring process under the new bankruptcy law.

Varig sought protection from creditors under the new bankruptcy law _ which took effect June 9 _ as it struggles to resolve debts totaling around 9.5 billion reals ($4 billion).

Chile's LAN Airlines June traffic rises 18.7 pct
11 July 2005

SANTIAGO, Chile, July 11 (Reuters) - Chile's dominant airline, LAN Airlines , said on Monday that its passenger traffic rose 18.7 percent in June, boosted by international travel.

LAN, one of the largest carriers in Latin America, said international passenger traffic, measured in passengers per kilometer flown, grew 22.2 percent in June, due to positive growth in European and South Pacific routes.

Also, the company said the international figures were aided by growth in June in Peruvian domestic routes and passenger traffic on flights within Latin America.

But domestic traffic in Chile fell 2.3 percent the company said in a news release, due to itinerary changes.

Cargo traffic improved 1.8 percent in June compared with the same month last year. But the load factor, which compares usage to capacity, decreased somewhat due to a slowdown in southbound demand and weaker-than-expected northbound traffic out of Latin America.

Brazil Airline WebJet Launches Service Seeking Mkt Niches
12 July 2005

SAO PAULO (Dow Jones)--The first flight of Brazilian low-cost airline WebJet took off Tuesday, as the latest firm to enter Brazil's increasingly competitive market launched services with an investment kitty of around $10 million.

WebJet is backed by a venture capital fund managed by Brazilian asset manager RealAssets Consultoria e Administracao de Ativos, RealAssets's founder, Mauro Molchansky, told Dow Jones Newswires. Just part of the venture capital has been invested in WebJet's launch to date, he said.

"WebJet is structured to be a small company, operating on routes with strong demand from passengers," Molchansky said.

The airline wants to tap the growing demand for air travel in Brazil, which has been boosted by economic growth and lower prices. According to the air industry regulator, the Civil Aviation Department, or DAC, Brazil's domestic market grew 14.5% in the first half of the year, reaching 15.2 million passengers.

By year-end the firm expects to have generated revenues of 100 million Brazilian reals ($1=BRL2.34), and in the first twelve months of operations it expects to handle 500,000 passengers, or about 3% of the domestic market.

The airline started operations with one leased aircraft from the 737-300 range of U.S. aircraft manufacturer Boeing Co. (BA), and aims to add another aircraft in the next few weeks and several more aircraft by year-end, Molchansky said.

This modest start reflects the company's strategy of offering the lowest fares on high-demand routes, but away from the traditional shuttle routes, which are already extremely competitive, he said.

"We are not competing on the shuttle services, where the competition is intense," Molchansky said. "We are going to segments where there isn't such intense competition and where there is demand to be met."

That means the firm isn't expecting the sort of spectacular growth achieved by the main low-cost operator in Brazil, Gol Linhas Aereas Inteligentes SA (GOL). Gol began operations in 2001 with six aircraft, and today has a fleet of more than 30, with expected revenue of BRL3 billion for 2005.

WebJet is aiming for "gradual and consistent growth, only in areas of high demand," Molchansky said.

WebJet is based in Rio de Janeiro and will initially fly a circular route from the Galeao airport to Brasilia, Sao Paulo and Porto Alegre, before returning to Rio de Janeiro, Molchansky said. By year-end, the firm expects to add other destinations including Curitiba, Florianopolis, Salvador, Recife and Belo Horizonte.

The company steers customers toward its Web site and call center for sales, but also sells tickets at its airport counters.

Two established rivals in the local market have already reacted to WebJet's low fares, cutting prices on competing routes. Brazil's flagship airline, Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, cut the price of some seats on its aircraft by 80%, while the largest domestic carrier, TAM SA (TAMM4.BR), cut prices on flights to Porto Alegre.

Gol realigned its prices in March and said it isn't planning any more changes for now.

All these carriers will face a number of new challengers in the domestic market in coming months. At least eight airlines have expressed plans to launch or expand services this year and next.

Brazil's Varig restarts talks with Portugal's TAP
14 July 2005

RIO DE JANEIRO, Brazil (AP) - Brazil's Varig airlines has restarted talks with TAP Air Portugal in an effort to save the debt-laden Brazilian carrier from bankruptcy, a company top executive said Thursday.

Varig's chairman David Zylberstajn told the Estado news agency that TAP had hired the investment bank J.P. Morgan as a financial adviser for a deal in which the Portuguese carrier would buy a 20 percent stake in Varig.

Varig's press office in Rio confirmed Zylberstajn's remarks and said the carrier was in preliminary talks with other possible investors.

Saddled with over 9.5 billion reals (US$4 billion, euro3.3 billion) in debt, Varig filed for bankruptcy protection on June 17 to avoid the seizure of 11 of its 82 jetliners by a division of American International Group Inc.

But the bankruptcy filing effectively voided talks with TAP Air, seen as a lifeline for Varig after years teetering on the brink of insolvency, with its domestic market share eroded by competition from low-cost carriers.

"Varig had to abandon the agreement with TAP when it started the judicial recovery process in June," Zylberstajn told Estado. "But TAP never gave up on Varig."

On July 12, a Rio bankruptcy court gave Varig 60 days to present its restructuring plan.

Zylberstajn said the current proposal would create a new company, to be called Nova Varig, with the participation of national and international investors.

Under the plan, Varig's current controlling shareholder, the Rubem Berta Foundation, would hold no more than 10 percent of the new company.

The foundation, which represents Varig employees, had blocked previous attempts to restructure the airline. But on Wednesday it agreed to relinquish control and hired Lufthansa Consulting to draw up a restructuring plan.

Venezuela state airline may buy 49 percent of Uruguay's Pluna
15 July 2005

CARACAS, Venezuela (AP) - Venezuelan state airline Conviasa is looking into buying a 49 percent stake in Uruguay's failing airline Pluna, the Tourism Ministry said.

The purchase is one of the many options being explored so that Conviasa can establish a joint operating agreement of some sort with Pluna, the ministry said in a statement Thursday night.

Venezuelan officials are meeting with airline representatives and taking a look at the company's finances and operations.

Government officials said the idea behind any deal would be to open up more South American routes for Venezuela's recently launched state airline. Pluna would also benefit by getting access to more destinations in the northern part of South America, officials said.

Earlier in the week, Uruguayan officials disclosed that Conviasa was seeking a possible venture with Pluna, but noted that no decision has been made yet on any deal.

Uruguay's flagship airline has been considered a financial disappointment by shareholders. Brazilian airline Viacao Aerea Riograndense S.A., or Varig, a shareholder in Pluna, has said it wants to sell its 49 percent stake in the airline.

The government of Venezuelan President Hugo Chavez has been cementing diplomatic and economic ties with neighboring countries by striking oil sale agreements, buying their public debt or by seeking alliances with government-owned enterprises.

This year, Chavez's government has purchased Argentine public debt and has announced plans to buy Ecuadorean bonds as well.

Gol Linhas increases Boeing plane order
25 July 2005

NEW YORK (AP) - Brazilian airline Gol Linhas Aereas Inteligentes SA said Monday that it will increase an order for Boeing's next-generation aircraft by 38 planes, bringing the order to 101 planes in all.

The discount carrier said the deal includes firm orders for 60 of the midsize Boeing 737-800s and purchase options for 41 more. The planes will be delivered between 2006 and 2012. Gol said the Boeing planes have features that will help it improve fuel efficiency.

TAP to make new bid for stake in Brazil's Varig in September

LISBON, July 25 (AFP) - Portuguese flag carrier TAP will make a new bid to buy a 20 percent stake in Brazil's heavily endebted Varig in September, after the troubed airline tables its restructuring plan, TAP president Fernando Pinto said Monday.

The proposal will be more complex than the initial bid because it will have to be submitted to Varig's creditors, he told daily Portuguese newspaper Diario de Noticias.

"TAP will only invest in Varig after the firm is restructured," he said.

"The idea is to present it (the bid) in September," he added.

TAP and Varig had been discussing a plan which would see the Portuguese airline invest an undisclosed sum in Varig in exchange for a 20 percent stake in the Brazilian carrier, the maximum allowed under Brazil's laws.

But the talks effectively ended when Varig filed for bankruptcy protection on June 17 to prevent some of its 82 planes from being seized by creditors.

Earlier this month a Brazilian court gave Varig, which has debts of over two billion dollars (2.4 billion dollars), a 60-day period to table a restructuring plan. Varig's single largest creditor is the Brazilian state.

TAP offers some 40 weekly flights from Portugal to Brazil, a Portuguese colony until the 19th century. It relies on Varig, one of Latin America's largest airlines, to offer its passengers connecting flights within Brazil.

The Portuguese carrier is the European airline with the most regular flights to Brazil and it wants to become a hub for travel from the continent to the country, which is becoming an increasingly popular destination for European tourists.

Varig has suffered financial problems for years due to growing competition in its domestic market from low-cost airlines and rising costs.

Both TAP and Varig are members of the Star Alliance, the world's largest airline partnership, which is led by Germany's Lufthansa and United Airlines.

Brazil Airline TAM To Begin New York Flights In November
25 July 2005

SAO PAULO (Dow Jones)--Brazilian airline TAM SA (TAMM4.BR) Monday said it will begin flights to New York's John F. Kennedy airport in November, after receiving authorization from the Brazilian government.

The date for starting the flights, as well as the number of flights per week, is to be established in August, the company said in a statement.

TAM said it expects to receive another A330 aircraft from Europe's Airbus (ABI.YY) in October, which will be used on the New York route.

TAM, Brazil's largest domestic carrier, already has international long-haul flights to Miami and Paris. Within Latin America, its destinations include cities in Argentina, Bolivia, Chile, Paraguay and Uruguay.

On Monday afternoon, TAM's shares were trading at 19.25 Brazilian reals ($1=BRL2.42), down 1.8% from Friday's close, while the main Ibovespa index was down 2.8%.

Aerolineas Argentinas Pilot Union Holds Surprise Strike
26 July 2005

BUENOS AIRES (Dow Jones)--Pilots at Argentina's flagship carrier, Aerolineas Argentinas (AR.YY), launched a surprise 10-hour strike Tuesday to demand higher salaries.

According to widespread media reports, the pilots plan to strike until 2100 GMT. Until then, both domestic and international flights are grounded. Aerolineas Argentinas is the country's dominant airline with an 85% share of the domestic market, and July is the peak month for winter vacations.

When the cold-weather holidays kicked off earlier this month, the pilots' union began a 48-hour strike during the busiest weekend that threatened to leave more than 60,000 passengers stranded. Aerolineas Argentinas characterized the union's actions as blackmail. The Argentine Labor Ministry intervened mid-strike and required the company and union to operate "minimum service," running at least 50% of domestic flights and 75% of international routes.

The union says its pilots' average monthly take-home salary is 2,300 pesos ($1=ARS2.8625) and it's asking for a 40% increase. Aerolineas Argentinas says the lowest end of its pilot salary scale is about ARS3,496 a month and the union's proposal would elevate that wage to about ARS4,782.

Aerolineas Argentinas' controlling shareholder is Spain's Marsans group. The Argentine government owns a 1.34% stake in the carrier.

Brazil TAM 2Q Net Loss BRL24.7M Vs BRL206.5M Pft
4 August 2005
Dow Jones International News

TAM said earnings before interest, tax, depreciation, amortization and aircraft rental costs, or EBITDAR, totaled BRL170.9 million, down from BRL201.3 million a year ago, due to higher fuel costs, partly offset by the appreciation of the Brazilian currency.

TAM carried 4.48 million customers during the quarter, up 47.5% from 3.04 million in the second quarter of 2004. Domestic passengers totaled 4.11 million and grew slightly faster than international services, which accounted for the remaining 369,000 passengers carried during the quarter.

TAM said it had 76 aircraft operating during the second quarter, compared with 70 aircraft in the second quarter of 2004. Furthermore, the daily aircraft utilization rate increased to 10.6 hours, up from 8.7 hours a year ago.

TAM said its average load factor, or aircraft occupancy rate, rose to 66.5% during the quarter, compared with 61.9% a year ago.

Revenues from cargo totaled BRL99.1 million, 38% from a year ago, while the firm's revenues from sublet aircraft slipped as it brought aircraft back into its own service.

TAM said costs increased to BRL1.24 billion, up 26.4% from a year ago, due to a 60% increase in fuel costs, a 51% increase in marketing costs and a 32% increase in personnel costs.

The airline said total debt fell to BRL509 million at the end of the second quarter, down from BRL609 million at the end of the first quarter, due to the appreciation of the Brazilian real and the payment of short-term loans and debentures.

The company's guidance for 2005 is to maintain an average 43.5% share of the domestic market, compared with an average 42.7% in the first half of the year.

Tam said it wants an average load factor equal to or higher than 68% for the full year, and wants to lift its aircraft utilization rates to between 11.5 and 12.5 hours per day by December.

The company expects to add another five aircraft during the second half of the year, to end the year with 81 aircraft, of which eight would be the larger A330 aircraft of Airbus (ABI.YY), mainly used for international flights, 53 would be A320s or A319s used on local routes, and 20 would be Fokker 100s.

LAN Air Acquires 12 767-300 Aircraft For Long-Haul Passenger And Cargo Ops
4 August 2005

MIAMI (Dow Jones)--Chile's LAN Airlines S.A. (LFL) and LAN Cargo will purchase 12 of Boeing Co.'s (BA) long-haul 767-300 aircraft for $1.1 billion.

In a press release Thursday, the airline carrier said it will use the aircraft for cargo and passenger operations. The aircraft, to be received between 2005 and 2008, are intended to double the company's freighter fleet, and also strengthen the international passenger routes serviced by LAN Alliance member airlines, including LAN Peru, LAN Argentina and LAN Ecuador.

LAN Airlines said the $1.1 billion investment is in addition to recent approval for the purchase of 25 short-haul Airbus A319 and A318 aircraft for $750 million announced in June.

Thursday's purchase, along with other acquisitions, will translate into 46 new aircraft over four years for a total investment of about $2.2 billion.

"This delivery marks the beginning of a historical initiative that shows the company's confidence in the development of Latin American countries," said Enrique Cueto, LAN Airlines chief executive. Cueto said the LAN Alliance will offer one of the most modern fleets worldwide.

American depositary shares of LAN Airlines changed hands recently at $36.75, down 35 cents, or 0.9%, on the New York Stock Exchange.

Boeing's shares traded recently at $66.60, down 5 cents, or 0.1%, on the Big Board.

Argentina Govt Agency To Sue Local Partner Of Chile's Lan
5 August 2005

BUENOS AIRES (Dow Jones)--A Justice Ministry agency is filing legal action against the controlling shareholder of Lan Argentina, the local subsidiary of Chilean carrier Lan (LFL), for violating airline ownership regulations.

In a resolution issued Thursday by the Inspector General's office, which oversees corporate conduct, the agency said it will file an "immediate lawsuit" against Aero 2000 SA, which controls 51% of Lan Argentina. The IGJ, as the agency is known by its Spanish acronym, received a complaint in April from Ariel Basteiro, a lower house legislator from Buenos Aires who also used to head an airline workers union. In late May, the IGJ started an investigation into Aero 2000's business dealings and ownership structure.

Basteiro's allegations, which the IGJ found to be with merit, centered around Argentine law that requires the majority of an airline company's shares to be locally owned.

Lan arrived in Argentina in late March, just as private carrier Southern Winds filed for bankruptcy amid a drug-trafficking scandal. The Chilean airline said it would guarantee Southern Winds' operations for three months and, more importantly, absorb all workers of Argentine state airline LAFSA through its new Lan Argentina subsidiary. LAFSA employees were previously working for Southern Winds under a government-brokered alliance between the two airlines.

To comply with the local ownership rules, Lan partnered with Aero 2000, a newly formed company with no planes or staffing. Lan then purchased 49% of Aero 2000. Basteiro, the congressman, said in his formal complaint that Aero 2000's owners are two Buenos Aires-based lawyers representing Lan.

Airline workers and some legislators had complained when Lan first entered Argentina that it had established Aero 2000 as a "paper company" to comply with the local ownership regulations. The IGJ gave credence to this allegation, saying that its visits to Aero 2000's registered headquarters - which were the offices of the Lan lawyers' firm - failed to turn up bookkeeping records and other documentation that would detail legitimate business operations.

In its Thursday resolution, the IGJ also said it would file a formal complaint against the two Lan lawyers at the disciplinary tribunal of the Public College of Lawyers of Buenos Aires City.

Argentine Transport Secretary Ricardo Jaime had defended Aero 2000, saying it was a legitimate local group that won a public tender to fly charter flights.

Lan Argentina press officials were unavailable for comment Friday.

The Chilean company ran into similar troubles in Peru last year, when a provincial judge ordered the government to ground LanPeru for violations of local ownership regulations. The company denied the charges and restarted flights after an emergency decree from the government.

Brazil Airline Varig Recovers Some Market Share In July
8 August 2005

SAO PAULO (Dow Jones)--Brazil's struggling flagship carrier, Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, recovered some of its share of the domestic market in July and regained second place, according to figures from Brazil's civil aviation department, or DAC.

Varig, which filed for protection from creditors June 17, saw its share of the domestic market move up to 26.5% in July, from 26% in June, but was still down from 29.5% a year ago.

No-frills airline Gol Linhas Aereas Inteligentes (GOL) saw its share of the domestic airline market slip to 26.4% in July, down from 28.8% in June and up from 21.7% a year ago. The startup airline had held second place in the domestic market since April.

TAM SA (TAMM4.BR) maintained a firm grip on first place with market share of 44.6% in July, up from 42.6% in June and 37.1% a year ago.

The total number of passengers transported on domestic routes during July, a busy month in Brazil for winter holidays, reached 3.44 million, up 26% from June 2004, according to DAC's figures.

Gol put in the best performance in terms of occupancy rates on domestic routes, averaging 80% load factor for its aircraft during July, compared with 77% in June. Both TAM and Varig also improved, reaching 79% and 77% load factors, respectively, the DAC said.

In the first seven months of 2005, Brazilian airlines transported 18.7 million passengers on domestic routes, up 16% from the same period a year ago, according to DAC.

In the international market, Varig continued to lose ground against its Brazilian rivals. Its share of the international market fell to 76.9%, down from 82% a year ago, while TAM's share rose to 20.9%, up from 17.5% a year ago.

On Monday, TAM said it has started selling tickets for its inaugural flight to New York City's John F. Kennedy airport, scheduled for November 10.

Gol, which began international operations in December with flights to Buenos Aires, Argentina, saw its market share remain steady from June, at 2.1%.

Brazilian carriers transported 2.4 million passengers on international routes in July, up 7.6% from a year ago.

Gol's occupancy rates on international flights strongly recovered in July, hitting 85% load factor, while Varig reported 81% and TAM reported 80%, the DAC said.

For the first seven months of the year, Brazilian carriers transported 14.7 million passengers on international routes, up 11.8% from the first seven months of 2004, the DAC said.

Lan Argentina Issues Defense Against Government Lawsuit
8 August 2005

BUENOS AIRES (Dow Jones)--The Argentine unit of Chilean carrier Lan (LFL) has issued a defense of its controlling shareholder, saying a government lawsuit against the company for violating airline ownership rules is without merit.

In local newspaper advertisements published Sunday, Lan Argentina said Aero 2000 SA, the group that owns 51% of the Argentine carrier, has always complied with local regulations. Moreover, the company said the government is siding with interest groups that are seeking to preserve a monopoly in the local airline market.

Last week, the Inspector General's office said it was filing an "immediate lawsuit" against Aero 2000 for non-compliance with a law that requires the majority of an airline company's shares to be locally owned. The IGJ, as the office is known in Spanish, is a Justice Ministry agency that oversees corporate conduct.

Lan entered Argentina in late March, agreeing to absorb all workers of Argentine state airline LAFSA thorugh its newly established Argentine subsidiary. LAFSA employees had been working for private carrier Southern Winds, which filed for bankruptcy amid a drug-trafficking scandal and lost a government fuel subsidy at the same time. Lan agreed to guarantee Southern Winds' operations for three months.

After a local congressman filed a complaint against Lan's business operations in Argentina, the IGJ conducted an investigation. The government is questioning Aero 2000 because it has neither airplanes nor staffing, and is reportedly majority-owned by two Buenos Aires-based lawyers who represent Lan. The IGJ said its inquiry failed to produce bookkeeping records and other documentation that would demonstrate legitimate business operations. Lan of Chile has a 49% stake in Aero 2000.

However, Lan Argentina said that, like all other local companies, Aero 2000 had to register with the IGJ and the government didn't raise any objections then.

"The IGJ resolution is concerned with making the Argentine market regress to a state contrary to interests of consumers who were seen as favored with Lan Argentina's entrance into a previous monopolic situation of a single operator of importance and, in addition, of foreign capital," Lan Argentina said.

Aerolineas Argentinas (AR.YY), whose controlling shareholder is a consortium led by Marsans of Spain, commands 85% of the domestic market.

Brazil Aircraft Co Embraer 2Q Pft BRL166.7M Vs BRL382.1M
12 August 2005

SAO PAULO (Dow Jones)--Brazilian aircraft manufacturer Empresa Brasileira de Aeronautica SA (ERJ), or Embraer, Friday said its second-quarter net profit slumped due to the appreciation of the local currency against the dollar, and lower sales to commercial airlines.

The world's fourth-largest aircraft manufacturer reported a net profit of 166.7 million Brazilian reals ($1=BRL2.37) for the second quarter of 2004, down 56% from BRL382 million in the second quarter of 2004, and down from BRL234.8 million in the first quarter.

The result was slightly lower than the BRL178.3 million average forecast from a survey of four analysts by Dow Jones Newswires.

"The current period of our economy with a strong appreciation of the real against the dollar had an intense impact on the numbers," Embraer said in a statement.

More than 90% of Embraer's sales are generated in dollars. The firm said the real averaged BRL2.48 per dollar during the second quarter, 18.7% stronger compared with BRL3.05 in the second quarter of 2004.

Net revenues plunged 36% to BRL1.94 billion, but came in above the BRL1.83 billion expected in the survey. [ 12-08-05 2257GMT ]

Embraer's gross profit fell to BRL474.8 million, compared with BRL1.06 billion a year ago.

Earnings before interest, tax, depreciation and amortization, or EBITDA, fell to BRL204 million, down 67% from a year ago, and lower than the BRL314.3 million expected by analysts.

This pushed the firm's EBITDA margin over net revenues, a measure of profitability, to 10.5%, down from 18.6% a year ago and significantly lower than the 17.2% analysts were expecting.

Embraer said working capital needs increased in the second quarter of 2005 as it starts production of the 175 and 190 lines of aircraft. As a result of higher inventory and high accounts receivable levels, Embraer recorded a net debt position of BRL552.1 million at the end of June, up BRL95.6 million from the end of March.

"As the number of deliveries increases and customer financing structures are finalized, we expect to reduce our inventory and accounts receivable levels by the end of the year, which should positively impact our cash position," Embraer said.

Embraer had already reported that it delivered 30 aircraft during the quarter, the same as in the first quarter. It reiterated its plans to deliver 85 aircraft during the second half of the year.

The company said inventories increased to $1.74 billion at the end of June, up from $1.57 billion at the end the first quarter.

Meanwhile, Embraer said it believes it is still in the running for a contract with Lockheed Martin Corp. (LMT) to supply the U.S. Army with a new spy plane, known as Aerial Common Sensor.

Lockheed had originally selected Embraer's ERJ 145 aircraft, but modifications to the project led it to look at alternatives, including the Gulfstream G550 and the Bombardier Global Express.

"We believe Embraer has the flexibility and technological capability to provide the customer with an adequate solution to cope with the new scenario," the Brazilian firm said.

Brazil Airline Varig 2Q Net Loss BRL342.4M Vs BRL393.9M
12 August 2005

SAO PAULO (Dow Jones)--Brazil's flagship airline, Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, Friday said net losses were reduced during the second quarter, compared with a year ago, despite a slowdown in revenues, as the firm benefitted from exchange rate variations.

The firm reported a net loss of 342.4 million Brazilian reals ($1=BRL2.37) for the second quarter, compared with BRL393.9 million in the second quarter of 2004.

Net revenues were 3.6% lower from a year ago, at BRL2.02 billion, while flight revenues were down 11.6% at BRL1.8 billion in the same period.

The company blamed strong competition and lower prices for the drop in revenues, partly offset by better operating performance.

Costs increased 6.5% to BRL1.68 billion, due to higher fuel consumption and higher fuel prices, Varig said in a statement. [ 12-08-05 2153GMT ]

The firm said financial costs fell to BRL53.6 million during the quarter, down from BRL270.8 million a year ago, primarily due to gains from foreign exchange variations. Brazil's real appreciated about 14% during the quarter.

Varig ended the quarter with 88 aircraft in its fleet, down from 92 a year ago, with 77 passenger jets and 11 cargo jets.

The firm, which began a court process to restructure its overwhelming debts June 17, said its contracted debt load was BRL5.6 million at the end of the quarter, compared with BRL5.69 at the end of the first quarter.

Government-related entities account for 64% of the contracted debt, while General Electric Co. (GE) is owed BRL256 million, Varig said. The airline pension fund, Aerus, is owed BRL1.06 billion.

The airline's total debt load, including off-the-books liabilities, is estimated at more than BRL9 billion.

Varig is scheduled to present a debt-restructuring plan to the court in Rio de Janeiro by mid-September.

Peruvian airliner crashes in jungle
23 August 2005

LIMA, Peru (AP) - A commercial airliner carrying an unspecified number of passengers crashed Tuesday near a jungle town. Radio reports said at least two people were dead and about 20 others injured with burns and broken bones.

"We are standing next to the cabin and we can see the body and it appears that it is a flight attendant in her uniform. We can also see a person, it appears to be a female," a correspondent for Radioprogramas radio said. "There are bodies of children. Many bodies."

The accident involving the Tans airliner reportedly occurred sometime after 4 p.m. local time (2300 GMT), about 9 kilometers (6 miles) from the municipal airport for the jungle city Pucallpa, 305 miles (490 kilometers) northeast of the capital, Lima.

Radio reports said the plane tried to make an emergency landing during bad weather. It was not immediately clear what type of airplane was involved.

Airport officials were not immediately available to confirm the information.

Lizandro Torro, a spokesman for Tans, a passenger airline run by Peru's military, said in Lima that the airline was evaluating the scope of the accident and would provide a statement shortly.

Venezuela's Pres To Visit Martinique In Wake Of Jet Crash
23 August 2005

CARACAS (AP)--Venezuelan President Hugo Chavez said Tuesday he would travel to Martinique this week to meet with French President Jacques Chirac to discuss a plane crash that killed all 160 people aboard.

Venezuelan investigators said black boxes from the West Caribbean Airways jet, which crashed on Aug. 16 in Venezuela while bringing passengers home to Martinique after a trip to Panama, would be sent to France.

Chavez, speaking live from Cuba on Venezuela's state-run television channel, said fuel contamination could have caused the McDonnell Douglas MD-82 jet to plummet to the ground.

"The experts say ... the gasoline was bad or it ran out of fuel. We don't know," he said. "It's very strange."

Shortly before the plane dropped toward the ground, the pilot radioed saying that both engines had failed. The engines have not yet been removed from the crash site.

Chavez said he would travel to Martinique on Wednesday, after visiting Jamaica.

Lt. Col. Lorllys Ramos Acevedo, chief of Venezuela's crash investigation board, said Venezuela would send the black boxes to France while investigations continue.

Ramos Acevedo said she was not sure when the boxes, which have been safeguarded at a military base, would be transported to France.

An effort to reconstruct the plane involving experts from France, neighboring Colombia and Venezuela has not begun yet, she said.

Forensic specialists are trying to identify victims from the plane that was carrying 152 passengers and eight Colombian crew members. They have been using dental records, fingerprints and DNA samples to identify the victims.

Investigators say the task of identifying the victims, many of which were torn apart when the plane hit the ground, could take several weeks. Federal investigators say 129 victims have been identified so far.

France discovered that West Caribbean Airways had been fined for safety violations only after the crash last week, the country's national civil aviation director said in an interview published Monday.

Michel Wachenheim, general director of France's Civil Aviation Authority, told Le Monde newspaper that Colombia did not notify any other governments when it fined the airline $45,000 in January.

Under international policy, Wachenheim said, each country is responsible for monitoring its own airlines and does not have to share details of security failings.

In January, the airline was fined for more than a dozen violations.

Brazil TAM Eyes Airbus, Embraer For New 100-Seat Planes
By Matthew Cowley
23 August 2005

SAO PAULO (Dow Jones)--Brazilian airline TAM S.A. (TAMM4.BR) is evaluating aircraft from Airbus (ABI.YY) and Embraer (ERJ) to replace its aging fleet of Fokker jets, according to TAM's chief financial officer, Libano Barroso.

By year-end, the company should decide whether to replace its Fokker 100 aircraft with either the Airbus's A-318 or Embraer's 190 model, Barroso said in an interview with Dow Jones Newswires Tuesday.

Embraer has the best 100-seaters in the market, because they were specifically designed for that purpose and are more economical than the heavier A-318, he said.

However, "it all comes down to price," Barroso added. "In the future, we may be a company that is just Airbus, or Airbus and Embraer."

TAM is already Airbus' largest customer in Latin America, with some 47 A-320 and A-319 aircraft for local routes, and six of the larger A-330 aircraft for long-haul flights.

The airline has firm orders for 30 more A-320s, with options on a further 20, and Barroso said the company has signed a memorandum of understanding with Airbus to replace the A-330 aircraft with larger A-350s, which are still under development, in 2012.

TAM is also expanding its fleet to meet rapid growth in the local market. According to Brazil's Civil Aviation Department, or DAC, the market grew 16% in the first seven months of 2005, one of the fastest rates in recent years.

TAM's growth was even faster, with its market share burgeoning to 44.6% in July, up from 31.7% in July 2004. Barroso attributed much of this growth to picking up nearly 90% of customers from Vasp, a rival airline that stopped flying in January, weighed down by debts.

The airline forecasts it will average a 43.5% market share for the whole of 2005.

This achievement was significant given the competition from startup rival Gol (GOL), the investor darling in the aviation market, and Brazil's largest airline, Varig (VAGV4.BR), which has been partly distracted by its debt restructuring process.

Second Half Of 2005 Seen Stronger Than First

Rapid customer growth helped TAM's balance sheet during an intensely competitive second quarter, Barroso said. Starting in March, and deepening in April, domestic airlines slashed prices to help buoy sales during what is traditionally the weakest quarter.

TAM expects a robust rebound in the second half of the year, with revenues per passenger, flight capacity and aircraft utilization already higher in July than the average during the first half of the year, and higher still in August, Barroso said.

By year-end, TAM expects the domestic airline industry to have grown about 14% in terms of passengers transported, nearly three times faster than current forecasts of 5% growth in gross domestic product.

For 2006, TAM sees that falling back to between 6% and 7.5% growth, returning to the industry's traditional growth rate of about twice the GDP growth, Barroso said.

TAM is also keeping its planes in the sky for more hours per day, Barroso said. The company hit more than 11 hours per day in August, up from 10.6 hours in the second quarter and 8.7 hours in the second quarter of 2004.

The domestic market will remain TAM's main focus, with international operations limited to specific markets where the company identifies potential for business travelers, Barroso said. Tourism, for now, is not attractive, he added.

"We won't do flights that aren't profitable, or leisure flights; our policy is defined," Barroso said.

To this end, TAM is launching a service to New York in November, and has identified London and Frankfurt as possible new markets, on top of its existing routes to Paris and Miami, he said.

Varig Restructuring Expected To Be `Rational'

The future of Varig remains a significant uncertainty for the Brazilian airline industry. Varig carries total liabilities of some BRL9 billion and is operating under court protection from creditors. It is scheduled to present a restructuring plan to the court by mid-September, which analysts say will either cure the problems, or send it into bankruptcy.

Barroso said TAM does not expect Brazil's government to provide any special priviledges for what is considered the country's flagship airline.

"The government is going to operate within the limits of the legally permitted rules. I don't believe the government is going to create any subsidy," Barroso said. "The government will be rational."

Meanwhile, TAM itself is emerging from a turbulent period. The airline decided in 1997 to expand its air taxi operations into regular commercial flights, backed in 1998 by fresh capital from private equity funds.

But the events of Sept. 11, 2001, followed by extreme economic volatility in the run-up to the 2002 presidential elections in Brazil, meant the company suddenly had too many aircraft. Furthermore, the unexpected death of company founder Rolim Amaro in a helicopter crash in 2001 left the family owned company shaken.

The new management undertook a significant restructuring program, including the early termination of a number of lease contracts, and an operational overhaul.

This process culminated in May with what was effectively an initial public offering of shares by TAM. The company raised BRL380.4 million for itself, and about BRL160 million for investment funds managed by Credit Suisse First Boston (CSR). As a result, TAM's free float was raised to 21.4% from under 1% previously.

The new capital has freshened up TAM's balance sheet and has given it cash to invest in new aircraft.

Barroso said his broader aim now is to reduce the company's leverage, to between 75% and 80% of book value, from 89% at present. This will either be through the accrual of the firm's own profits, or a new share sale, he said.

TAM's preferred shares, meanwhile, began trading at BRL18, and are currently at around BRL25.50, outperforming the broader Ibovespa stocks index over the period.

UBS, an investment bank, recommends buying TAM's shares, which are the top pick in its Latin American airlines portfolio, and has a 12-month price target of BRL30 for them.

"We believe TAM offers a compelling combination of near-term earnings momentum and long-term earnings growth, improving returns and, above all, overly discounted valuation multiples," the bank said in a recent report.

Peru Airliner Splits in Two, Kills 41
By CARLA SALAZAR, Associated Press
Aug 23, 2005

LIMA, Peru - A Peruvian airliner split in two after an emergency landing during a fierce storm, killing at least 41 people. It was the world's fifth major airline accident this month.

TANS Peru Flight 204, a Boeing 737-200 with 100 people on board, was on a domestic flight from the Peruvian capital Lima to the Amazon jungle city of Pucallpa when the pilot tried to make an emergency landing about 20 miles from Pucallpa on Tuesday, said Edwin Vasquez, president of the Ucayali region where the city is located.

The pilot tried to land in a marsh to soften the impact but the landing split the aircraft in two, he said.

Some survivors said they escaped the burning wreckage of the plane in a hailstorm and waded through knee-deep mud to get away.

Police Lt. David Mori told The Associated Press that 41 dead passengers had been recovered from the plane and 56 people were being treated at hospitals. Rescue workers had to suspend searches for bodies in the wreckage due to darkness and bad weather overnight but planned to resume operations at dawn Wednesday.

"There were people who walked away from the crash uninjured," he said. "It's not very clear how many."

Among the dead were at least three foreigners — an American woman, an Italian man, and a Colombian woman, Mori said. Many of the bodies could not immediately be identified and at least three people were still missing, he said.

The plane circled the airport, then crashed near a highway, according to officials and radio reports. Before the crash, the pilot radioed that he could not land because of strong winds and torrential rains, airport receptionist Norma Pasquel told The Associated Press by phone.

"I felt a strong impact and a light and fire and felt I was in the middle of flames around the cabin, until I saw to a my left a hole to escape through," survivor Yuri Gonzalez told Radioprogramas. "Two other people were struggling to get out and I also was able to."

He said he heard another person shouting to him to keep advancing because the plane was going to explode.

"The fire was fierce despite the storm," he said. "Hail was falling and the mud came up to my knees."

Canal N television broadcast photo images of survivors being carried on stretchers from a grassy field strewn with wreckage.

Jorge Belevan, a spokesman for TANS, said the plane was on a domestic flight carrying 92 passengers and eight crew members and was attempting an emergency landing when it crashed near Pucallpa, 305 miles northeast of Lima.

"The plane did not crash. It did not fall. The plane made an emergency landing," Belevan said, adding that it did not appear the crash was caused by a technical failure in the 22-year-old aircraft.

"The preliminary information we have is that the accident could have been caused by wind shear," he said.

Wind shear is a sudden change in wind speed or direction. The most dangerous kind, called a microburst, is caused by air descending from a thunderstorm.

Tomas Ruiz, another passenger, told Radioprogramas: "It seems it was a matter of the weather. Ten minutes before we were to land in Pucallpa, the plane began to shake a lot."

The crash was the world's fifth airliner accident this month.

Last week, 152 people died when a Colombian-registered West Caribbean charter went down in Venezuela. Two days earlier, 121 people died when a Cyprus-registered Helios Airways Boeing plunged into the mountains north of Athens.

Sixteen people were believed to have died Aug. 6 when a plane operated by Tunisia's Tuninter crashed off Sicily. In Toronto, all 309 people survived aboard an Air France Airbus A340 that overshot the runway on Aug. 2.

In January 2003, a TANS twin engine Fokker 28 turbojet, plowed into a 11,550-foot high mountain in Peru's northern jungle, killing all 42 passengers — including eight children — and four crew members aboard.

Venezuela Plane Crash Black Boxes Usable
26 August 2005
Associated Press Newswires

PARIS (AP) - Both flight data recorders from last week's West Caribbean Airways plane crash were damaged, but officials believe they are in good enough condition to yield clues, French investigators said Friday.

After the Aug. 16 crash in Venezuela, which killed 152 tourists from the French island of Martinique, Venezuelan authorities sent the recorders to mainland France for analysis.

Investigators "saw that the recorders were damaged in the accident, but that the protected part, which contains the information, seemed to be in good condition," France's Accident Investigation Bureau, or BEA, said in a statement.

"There is therefore a reasonable hope that, if data were recorded, they can be recovered," the statement said. The bureau didn't say how soon it would be able to provide information from the data.

Passengers on board the MD-82 jet plane were returning to Martinique after a week in Panama. Eight Colombian crew members were also killed when the plane plunged to the ground after the pilot reported both engines had failed.

Workers At Brazil Airline Varig Object To Cargo-Unit Sale
26 August 2005

SAO PAULO (Dow Jones)--Brazil's national federation of civil aviation workers, or Fentac, has objected to plans by the country's largest airline, Varig (VAGV4.BR) to sell its cargo unit, Variglog, a union spokesman said, confirming local press reports.

Fentac, which represents all the aviation unions and consequently a large share of Varig's workforce, said it has also asked the Rio de Janeiro court handling the airline's debt-restructuring process to freeze any asset sales, the spokesman said.

Furthermore, the federation has asked the court to remove Varig's management team because of fraud in the restructuring process, the spokesman said.

Fentac President Celso Klafke was scheduled to hold a press conference later Friday to provide further details.

According to Varig, the deal with U.S. private equity firm Matlin Patterson Global Advisers LLC, which includes the Variglog sale, will provide about $103 million in cash to cover overdue debts which threaten to shut down its operations.

"Entering into this transaction is presently the only viable alternative available to the airline on the very short term," Varig said in documents filed with a New York bankruptcy court.

Varig is preparing a plan to restructure its balance sheet, which is weighed down by total liabilities of more than 9 billion Brazilian reals ($1=BRL2.40). The airline has hired Lufthansa Consulting, investment bank UBS and Brazilian private economic research institute Fundacao Getulio Vargas to work on the plan.

Matlin has offered to buy 95% of Variglog's shares for $38 million. It will also prepay $50 million of Varig's receivables from airfare sales through Visa cards, and will provide a $15 million loan as an advance on the credit card receivables.

Varig said it is in arrears on the payment of approximately BRL28 million to its employees, and the risk of a workers' strike is "imminent." The airline is also overdue on a further $20 million owed to aircraft and engine leasing firms, which may try to seize their assets.

On Aug. 17, the International Lease Finance Corporation asked the New York court for immediate repossession of all aircraft leased to Varig, the documents said. Judge Robert Drain is scheduled to hear the request on Aug. 31.

ILFC said in court documents that Varig has defaulted on payments since the restructuring process began on June 17, and that leased aircraft have been "improperly maintained and/or damaged" by Varig and its subsidiaries.

ILFC said its employees have seen Varig "removing and cannibalizing" parts of its aircraft for use in replacing failing parts on other aircraft.

Meanwhile, Varig said that since June 17, its main suppliers, including oil firm Petrobras (PBR), Shell Brasil, Esso, Infraero and IBM, have refused credit and began demanding payment up front.

Furthermore, credit-card administrators in Brazil, which account for about 35% of Varig's sales, started demanding increased escrow deposits, reducing the firm's cash flow by BRL25 million per month.

New York's southern district bankruptcy court has not yet ruled on Varig's request to recover $5.1 million from GE Commercial Aviation Services LLP, or Gecas, which had said Varig had broken terms of a May 2004 financial agreement and therefore triggered a default.

The airline reiterated its belief that it is "operationally viable, which is to say that the sum total of its revenues is surely higher than the sum total of its expenses."

Variglog has 18 aircraft, all of them under leasing agreements entered into with international lessors. The unit also pays about $9 million per month to Varig for room on its passenger aircraft. Under the agreement with Matlin, this deal will remain in place until Dec. 31.

Variglog reported a loss of BRL17.2 million in 2004, BRL11.6 million in 2003 and BRL131.4 million in 2002.

Variglog's valuation was $100 million, including debts of BRL45 million, and the unit needs an investment of $15 million to overhaul grounded aircraft, Varig said.

Peru considers Tans airline's fate after deadly crash

LIMA, Aug 26 (AFP) - Peru's government is reviewing the fate of embattled Tans Peru airline after a Boeing 737-200 operated by the state-owned company crashed in the Amazon, killing 40 people, President Alejandro Toledo said Friday.

"We are carefully examining its fate," Toledo said, adding that plane crashes "are not exclusive to Tans or Peru."

He said he would not speculate on what that would mean for the airline.

Meanwhile, authorities were still looking for one of the two data flight recorders, or black box, in a swamp near Pucallpa, a jungle outpost 840 kilometers (520 miles) northeast of Lima.

Tans, owned by the Air Force, has been heavily criticized since Tuesday's crash. The plane broke in two after slamming into the jungle, and 58 people survived the disaster.

Critics have complained about its security, noting that Tuesday's accident came two years after a Tans plane crash that left 46 people dead. According to the Aviation Safety Network, Tans has suffered six crashes since 1992.

Brazil Court Stops Airline Varig From Selling Cargo Unit
29 August 2005

SAO PAULO (Dow Jones)--A Brazilian court Monday suspended the sale of the cargo unit of the country's largest airline, Varig (VAGV4.BR), to U.S. private equity firm Matlin Patterson Global Advisers LLC, a court spokesman told Dow Jones Newswires.

Judge Giselle Bondim Lopes Ribeiro, of the federal labor court in Rio de Janeiro, suspended the sale at the request of the national federation of civil aviation workers, known as Fentac, which claims the sale of VarigLog was fraudulent and harmful to workers.

"I accept (Fentac's) allegations and rule that the company shouldn't be sold," the judge said in the written sentence.

The court said VarigLog's value is estimated at $300 million, which is three times higher than the $100 million valuation agreed by Varig and Matlin Patterson.

The deal with Matlin, which includes the VarigLog sale, would generate a total of about $103 million in cash to cover overdue debts which threaten to shut down its operations.

A number of creditors, primarily aircraft and engine leasing firms, claim Varig has defaulted on payments and have asked a bankruptcy court in New York to freeze the airline's planes. The court is scheduled to hear the complaints on Aug. 31.

The cash-flow problems threaten to derail Varig's plan to restructure its balance sheet, which is weighed down by total liabilities of more than 9 billion Brazilian reals ($1=BRL2.34).

The airline has hired Lufthansa Consulting, investment bank UBS (UBS) and Brazilian private economic research institute Fundacao Getulio Vargas to work on the plan, which is scheduled to be presented to a Rio corporation court by mid-September.

Matlin has offered to buy 95% of VarigLog's shares for $38 million in cash. It will also prepay $50 million of Varig's receivables from airfare sales through Visa credit cards, and will provide a $15 million loan as an advance on the credit card receivables.

Varig declined comment when contacted, saying it hasn't yet been formally notified of the decision.

Venezuela air crash burned for 20 minutes: official

CARACAS, Aug 29 (AFP) - The West Caribbean airline flight which crashed in Venezuela killing all 160 aboard burned for about 20 minutes on the ground, a Venezulan official said Monday, a fact which rendered unlikely the theory that the plane had run out of fuel before crashing.

Evidence from the crash site suggests a fire ignited and burned for about 20 minutes after the plane plunged into a marshy area in northern Venezuela on August 16, Antonio Rivero, head of Venezuala's civil safety agency, told AFP.

"The fire covered a surface area of about 50 meters (164 feet)," despite the marsh and ongoing rainfall, said Rivero, one of the first to reach the site of the crash.

The crash of the twin-engine McDonnell Douglas MD-82 aircraft on a flight from Panama to Martinique killed 152 French passengers from Martinique and eight crew from Colombia.

According to a Caracas airport tower recording of communications with the plane, reported Sunday in El Nacional newspaper, the pilot reported trouble with both engines before crashing.

This has led to some speculation that the plane may have run out of fuel. However, the likelihood that leaking fuel fed a post-crash fire weakens that theory.

Another theory which has been reported is that the plane was using low-quality fuel which affected engine performance.

Brazil Varig Has No Alternative To Cargo Unit Sale -Report
30 August 2005

SAO PAULO (Dow Jones)--Brazil's flagship carrier Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, could halt operations if local courts maintain a suspension of the sale of the company's cargo unit, Varig Chairman David Zylberstajn said in Tuesday's edition of local newspaper O Estado de Sao Paulo.

"Varig has no Plan B; these people are playing with fire," said Zylberstajn, referring to the National Federation of Civil Aviation Workers, known as Fentac.

Fentac represents a large share of Varig's employees.

On Monday, a local court suspended the sale of cargo unit VarigLog to U.S. private equity firm Matlin Patterson Global Advisers LLC, at the request of Fentac. The court accepted Fentac's allegations that the sale was fraudulent and harmful to workers.

Last week, Varig announced a deal with Matlin that includes the sale of VarigLog. The deal would generate about $103 million in cash to cover overdue debts, which threaten to shut down Varig's operations. However, the court said VarigLog's value is estimated at $300 million.

Matlin has offered to buy 95% of VarigLog's shares for $38 million in cash. It will also prepay $50 million of Varig's receivables from airfare sales through Visa credit cards, and will provide a $15 million loan as an advance on the credit card receivables.

Varig has said the sale of its cargo unit is the only alternative to resolve its short-term cash difficulties. A number of creditors, primarily aircraft and engine leasing firms, claim Varig has defaulted on payments and have asked a bankruptcy court in New York to freeze the airline's assets. The court is scheduled to hear the complaints on Aug. 31.

The cash-flow problems threaten to derail Varig's broader plan to restructure its balance sheet, which is weighed down by total liabilities of more than 9 billion Brazilian reals ($1=BRL2.385).

Brazil's Gol Says 3Q Loads Up - Demand, Competition Strong
31 August 2005

RIO DE JANEIRO (Dow Jones)--Brazilian low-cost airline Gol Linhas Aereas Inteligentes has seen strong load factors on its aircraft during the third quarter, and yields are recovering, albeit slowly, the airline's top finance executive said Wednesday.

"Load factors are very strong, but yields are recovering slowly," said Gol's chief financial officer, Richard Lark.

"Demand is very good. Demand is such that yields could improve even further," Lark said, speaking on the sidelines of a seminar in Rio de Janeiro.

The company had expected both yields and loads to rise during the third quarter compared with the second quarter, but prices have lagged as the market remains intensely competitive.

"There is a lot of price competition going on in the market right now," said Lark.

Earlier Wednesday, TAM SA (TAMM4.BR), the largest carrier in the domestic market, said it was cutting prices by up to 85% on certain routes in the run-up to the country's Sept. 7 Independence Day holiday.

Meanwhile, competition has also hurt the airline's ability to pass on oil- price rises to consumers, Lark said.

Since its launch in 2001, the company has usually been able to pass on about 80% of oil price rises, but in the first half of this year it was only able to pass on about 50%, he said.

UPDATE: Eight Killed As Small Plane Crashes In Colombia
1 September 2005

BOGOTA (AP)--A small private jet crashed into a field shortly after takeoff from the Colombian capital Thursday, killing all eight people aboard, aviation officials said.

The twine-engine Piper Navajo, which was headed from Bogota's Guaymaral airstrip for the central town of Puerto Berrio about 175 kilometers away, apparently suffered mechanical problems, said Fernando Sanclemente, director of Colombia's Civil Aviation agency.

"The pilot tried to make an emergency landing and the plane caught fire," Sanclemente said. "Firefighters rushed to the scene but sadly there were no survivors."

He said the victims were the two pilots and six passengers, but didn't reveal their identities.

Video footage showed parts of the plane scattered across a field outside the capital as investigators in white coats sifted through the debris.

It wasn't immediately clear who owned the plane.

Colombia's air safety record has come under scrutiny after a Colombian-owned West Caribbean charter jet crashed Aug. 16 in Venezuela, killing all 160 on board, most from the French Caribbean island of Martinique.

Moments before Thursday's crash, Transport Minister Andres Ariel Gallego told a conference on air safety in Bogota that he had instructed the Civil Aviation agency to conduct a thorough review of all Colombian airlines.

Aviation officials "need to check the maintenance conditions and operational safety of every aircraft that flies in Colombia," Gallego said. "Companies that don't comply (with the norms) will be barred" from flying.

In March, another West Caribbean plane, a twin-engine Let-410, crashed during takeoff from the tiny Colombian island of Old Providence, killing eight people.

Brazil Crt Lifts Injunction On Sale Of Varig Unit
1 September 2005

SAO PAULO (Dow Jones)--A Brazilian court Thursday lifted its injunction preventing Brazil's struggling flagship airline Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, from selling its cargo unit, the court said in a statement.

The Rio de Janeiro labor court said it lifted the injunction issued Monday after another court, which is handling Varig's broader debt-restructuring process, said the cargo unit, VarigLog, as well as aircraft maintenance unit VEM, are included in the process.

The planned sale of 95% of shares in VarigLog to U.S. private equity fund Matlin Patterson still requires the authorization of Rio de Janeiro's 8th corporate court, which is managing the debt restructuring.

Varig last week said it expects to receive up to $103 million from the deal with Matlin Patterson, and some of the proceeds would be used to pay debts with leasing firms accrued since it filed for protection from creditors on June 17.

Matlin plans to pay $38 million in cash for VarigLog, and will advance up to $65 million in receipts from Varig credit card sales.

"The sale of the logistics and cargo subsidiary will give Varig room to breathe," Varig's president, Omar Carneiro da Cunha, said in a statement. "Varig urgently needs cash to keep going during this period of recovery, which runs until December."

The executive sought to allay employees' concerns about the impact of the restructuring process.

"We will restructure the company always seeking to reduce the losses for creditors, including labor debts," the company's president, da Cunha said.

Thursday's court decision was the second boost in two days for Varig, and helps pull the airline back from the brink of having its operations grounded.

On Wednesday, a court in New York handling claims by international leasing firms against Varig gave the airline until Sept. 20 to settle outstanding payments.

The court decisions give Varig more time to prepare its broader plan in Brazil to restructure some 9 billion Brazilian reals ($1=BRL2.36) of liabilities, without the threat of having its operations shut down.

Varig filed for protection from creditors on June 17, and has until mid-September to present its restructuring plan to the Rio de Janeiro court.

Part of the debt-restructuring plan is expected to include the inclusion of new equity partners at Varig, and the airline has already held talks with TAP Air Portugal (TPA.YY) and a number of other groups.

Chilean LAN Airlines Adding Fuel Surcharge On Fares
7 September 2005

SANTIAGO (Dow Jones)--LAN Airlines SA (LFL), Chile's largest carrier, will add a $10-$60 surcharge to its one-way fares in light of rising fuel prices, the company said Wednesday.

The company attributed the need to charge its passengers the additional fee, which will vary depending on the route, to "unprecedented high fuel prices." It said it was "following the global trend in the airline industry."

The surcharge goes into effect Sept. 20, the company said in a statement.

LAN will charge domestic passengers $10 each way, regional passengers within South America and Easter Island, $20 each way, and all other international flights to and from South America, $60 each way.

These surcharges may vary with changes in international fuel prices, the company added.

According to the carrier, fuel costs represented 22% of total costs in 2004. In the first half of this year, that rose to 25%, or $279 million.

The company said it spent $84 million more for fuel in the first half of 2005, compared with the same period in 2004.

Brazilian gov't to finance domestic Embraer sales

SAO PAULO, Brazil, Sept 8 (Reuters) - Brazil's state-owned development bank is preparing to loan money to a domestic airline to buy passenger jets from home-grown plane maker Embraer, the bank's president said on Thursday.

"For sure (the loan) will be ready by November," Guido Mantega, president of BNDES, as the development bank is known, said at a news conference in Sao Paulo.

Mantega did not say who the potential buyer would be, but executives at TAM Linhas Aereas , the country's leading airline, have expressed interest in buying planes from Embraer in the past.

TAM Chief Executive Marco Antonio Bologna said in June that the carrier wanted to expand its fleet to serve more regional routes, and that Embraer's next-generation planes would be ideal for the task.

TAM currently flies 21 aging Fokker 100s on regional routes.

Embraer, short for Empresa Brasileira de Aeronautica, is the world's fourth-largest civil aircraft manufacturer, with clients in Asia, Europe, North America and the Middle East. It specializes in long-range regional jets in the 70- to 110-seat niche, and also makes military aircraft and private jets.

But for all its success overseas, Embraer has been unsuccessful at selling passenger jets in Brazil, in large part due to high interest rates and a heavy tax burden.

Instead, most Brazilian airlines are Boeing Co. and Airbus customers, giving them access to cheaper credit in foreign markets where they tend to pay interest based on the London interbank offered rate, or Libor.

To make it feasible for Brazilian airlines to buy Embraer planes, Mantega said the BNDES would align its long-term interest rate with international borrowing costs, also based on Libor.

Embraer's main rival in the regional jet market is Canada's Bombardier Inc. , which currently only makes stretched versions of its old-style 50-seat commuter planes that seat up to 86 passengers.

Brazil Airline Varig Reports BRL508.7M Net Loss Jan-Jul
8 September 2005

SAO PAULO (Dow Jones)--Debt-laden Brazilian airline Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, Thursday reported a net loss of 508.7 million Brazilian reals ($1=BRL2.322) for the first seven months of 2005 compared to a loss of BRL542.1 million in the same period of 2004.

Net revenue during the seven months ended July was BRL4.1 billion, up from BRL3.9 billion a year ago, while costs rose 16% to BRL3.2 billion, Varig said.

The company's financial costs fell 47% to BRL215.8 million, primarily due to BRL100 million in foreign exchange gains. The Brazilian real has appreciated significantly during 2005, reducing the cost of U.S. dollar-denominated debts.

In a statement, Varig said it will be reporting financial results on a monthly basis as part of the court-managed financial restructuring process that began on June 17.

Varig started the debt restructuring process to prevent creditors from seizing its aircraft. The company has total liabilities of more than BRL9 billion, and the restructuring plan is expected to either revitalize the struggling airline or hasten its bankruptcy.

By mid-September, Varig is scheduled to present its debt restructuring plan to the court. If authorized, the plan would then be put to creditors for their approval.

Meanwhile, a Brazilian press report Thursday said that a number of groups have presented financing plans to Varig or to the court handling the debt restructuring process.

According to the Estado news agency, a group of Italian and U.S. private equity investors have offered to invest up to $1.2 billion to buy control of Varig from the Fundacao Rubem Berta, which owns a majority of the airline's shares.

The investors are looking at a four- to five-year turnaround for Varig, according to the news agency.

Meanwhile, Brazilian businessman Nelson Tanure, owner of the Jornal do Brasil and Gazeta Mercantil newspapers, is reported to have offered to invest $90 million in Varig.

Earlier this year, TAP Air Portugal said it was interested in buying Varig shares up to the 20% maximum limit on foreign ownership of an airline imposed by Brazilian law.

September 12, 2005
Brazil Air Shareholder to Give Up Control

The main shareholder of Brazilian flagship airline Varig will relinquish control of the company as part of a restructuring plan to prevent the carrier from collapsing under a mountain of debt.

Previous efforts to reorganize Varig have failed because of reluctance by the Rubens Berta Foundation, which represents employees, to cede control.

But that step is necessary to attract new investors and pay off debts of 7.7 billion reals ($3.3 billion), Varig said Monday in its long-awaited restructuring announcement. Nearly 60 percent of the debt is in overdue taxes and unpaid social security contributions.

"We won't fail to pay anyone. We just need time," Varig President Omar Carneiro da Cunha said.

The company presented its reorganization plan Monday to a Rio de Janeiro court and said it will meet with creditors Sept. 24 aimed at forming a creditors' committee representing their interests. Varig's full name is Viacao Aerea Riograndense SA.

As part of the restructuring, Varig _ the biggest carrier in Latin America's largest country _ plans to break itself into two companies.

The foundation, which owns 56 percent of Varig, would end up with a minority stake.

One division will manage most of Varig's current operational units plus two regional airline subsidiaries, Rio Sul and Nordeste. The second will include Varig's main administrative units and will manage debts and debt negotiations.

After the debt issues are resolved, the two companies will be merged, possibly within two years, Varig said.

The airline also said it will cut 13 percent of its 12,000 person work force by the end of 2006 in an effort to save about $168 million annually.

The carrier's fleet now stands at 78 planes, down from 118 in 2002, but the company did not say how many planes it would fly following the reorganization.

Varig said cutting costs, streamlining operations and boosting sales would generate some $307 million per year in revenue.

Varig's plan must be approved by creditors and by the court before it can be put in place. Creditors have until Dec. 17 to approve or reject the plan, said David Zylberstajn, Varig board chairman.

Portugal's state-owned TAP Air Portugal airline expressed interest in acquiring up to 20 percent of Varig months ago, but those talks fell apart after the foundation balked at giving up control of the airline.

Zylberstajn said TAP is now expected to take a close look at the restructuring plan, but hasn't yet made a formal proposal to take a stake in Varig.

Portugal's TAP Interested In Deal With Brazil's Varig
13 September 2005

SAO PAULO (AP)--Portugal's state-owned TAP Air Portugal (TPA.YY) airline will closely examine a restructuring plan proposed by Brazilian flagship carrier Varig (VAGV4.BR) to determine whether the two companies should join forces in some sort of alliance, a TAP spokesman said Tuesday.

"We're still interested" in doing business with Varig, TAP spokesman Antonio Monteiro said from Lisbon, Portugal. "We hope it can happen but it's too early to say how it might happen."

TAP first expressed interest months ago in taking a 20% stake in debt-laden Varig, but backed out after the Brazilian carrier's controlling shareholder balked at ceding control.

But Varig on Monday announced that the shareholder, the Rubens Berta Foundation - which represents employees - will reduce its 56% controlling stake to a minority position under terms of the plan.

Monteiro said TAP will now examine Varig's restructuring plan before deciding how or when the companies might develop a deal. The two airlines already have a code-sharing deal on some trans-Atlantic flights, and analysts have said they could both cut costs by eliminating overlapping routes.

Varig wants to attract new investors and pay off debts of $3.3 billion.

The company presented its reorganization plan Monday to a Rio de Janeiro court and will hold a meeting with creditors Sept. 24 to form a creditors' committee representing their interests. Varig's full name is Viacao Aerea Riograndense SA.

The airline also plans to cut more than 1,550 jobs - 13% of its workforce - by the end of 2006 in an effort to save about $168 million annually.

Varig's fleet now stands at 78 planes, down from 118 in 2002. The company didn't say how many planes it would fly following the reorganization.

Varig's plan must be approved by creditors and by the court before it can be put in place. Creditors have until Dec. 17 to approve or reject the plan.

The company in recent years has lost significant market share, particularly on the domestic front, to Brazilian carriers Gol Linhas Aereas Inteligentes SA and TAM Linhas Aereas SA.

Under the restructuring, Varig plans to concentrate on more profitable domestic routes and will consider adding more international routes, possibly to China and Japan. Brazil has one of the largest communities of people of Japanese descent outside Japan, and also has strong trade ties with China.

Varig also wants to become more efficient by streamlining its fleet to reduce maintenance costs. Currently, the carrier uses nine different planes made by six manufacturers.

Brazil's Not-So-Favored Airline
Once a Government Darling, Varig Faces Vagaries of Competition
By Geraldo Samor
14 September 2005
The Wall Street Journal

Rio de Janeiro -- FOR MUCH OF ITS 78-year history, Viacao Aerea Rio-Grandense -- known more commonly as Varig airlines -- was Brazil's pampered national champion; it got ahead by getting along with the government, which limited competition. But as Brazil unshackled its markets, those same government ties handcuffed the company.

When politicians wanted flights, Varig was lavish in handing out courtesy tickets. As the government sought to weave together this massive country, Varig flew to the hinterlands, whether or not routes were profitable. When Brasilia strengthened ties with Africa in the 1980s, Varig started flying to unprofitable destinations there.

"We had 100% market share in places that were not profitable," Chief Executive Officer Omar Carneiro da Cunha says.

Now Varig is struggling to stay aloft, mirroring the drama consuming old-style carriers world-wide. In Europe and the U.S., for example, deregulation unleashed a torrent of competition from new no-frills carriers, as well as stronger old-line rivals that capitalized on market liberalization.

Saddled by $3.3 billion of debt -- most owed to the government for back taxes and social-security payments -- Varig in June became the first major Brazilian company to seek protection from creditors under the country's new bankruptcy law, which allows companies to work out reorganization plans. Varig filed its plan with the court Monday.

Many non-Brazilians know Varig as the Latin American arm of the Star Alliance airline network, which includes United Airlines and Lufthansa. Varig has agreements with 211 airlines, including its 15 Star Alliance partners. According to a Varig spokesman, Star Alliance partners account for almost half of Varig sales made through other airlines.

At home, the airline's market share has dropped by half over the past four years to 26.5% in August, at a time when Brazil's market is expanding at a double-digit clip. It is losing business customers to TAM, which has become Brazil's No. 1 carrier by rolling out red carpets to business travelers and offering top-notch food. Meanwhile, Gol Linhas Aereas Inteligentes, which pioneered low-cost, low-fare travel in Brazil in 2001, is winning over tourists and other budget-conscious travelers. Recently, another low-cost carrier, Webjet, started operations linking four major cities, and two charter airlines received government permission to become regular carriers, adding to the price competition.

Older carriers in the U.S., meanwhile, are struggling with outdated work practices and weak finances. UAL Corp.'s United Airlines and US Airways Group have been stuck in Chapter 11 proceedings for more than two years because of trouble striking deals with unions and sorting out finances. Delta Air Lines and Northwest Airlines are flirting with bankruptcy filings unless staff make big concessions.

Europe's laggards hoped direct and indirect subsidies and political protection would help them survive in the face of stronger rivals, but largely have failed. Tougher European Union rules since the late 1990s have stopped much of that government support.

The Brazilian government didn't bail out troubled airlines, but until the mid-1990s it helped them by regulating prices and keeping the market protected -- although carriers were hurt by anti-inflationary plans that at times froze fares and crippled their bottom lines.

In Brazil, as in other markets, low-cost air travel is growing. After Gol saw its stock double since it went public in June 2004, a number of similar projects are springing up in the region, most notably in Mexico. That country's flagship carrier, Mexicana, recently launched low-cost airline Click, while Mexican media conglomerate Grupo Televisa SA said it plans to take a 25% stake in another low-cost airline to be launched next year. Gol also has extended its ambitions beyond Brazil, and plans to launch a Mexican low-cost carrier in 2006.

"The industry is undergoing a reality check," Gol CEO Constantino Oliveira said. "The majors will try to look more and more like the low-cost airlines."

As part of its reorganization plan filed Monday, Varig said it will cut staff by 13% by the end of 2006 as it tries to trim annual costs by roughly $168 million. It also will create a special-purpose company with the right to use its aircraft, brand and mileage program as well as other assets yet to be determined. Control of the new company, which won't carry the heavy debt that has crippled Varig, will be offered to investors such as private-equity funds. Portugal's state-owned TAP Air Portugal -- run by a former Varig CEO -- said it is interested in a stake in the Brazilian carrier. TAP has hired J.P. Morgan Chase & Co. and Brazilian law firm Mattos Filho to advise it on a possible bid.

If it succeeds, Varig will emerge as a scaled-down carrier in a growing Brazilian market. Over the next 20 years, Boeing Co. forecasts that Latin America will require 1,600 new planes costing $88 billion -- a market second only to China in projected air-travel growth. Brazil, the largest single Latin American market, likely will account for 43% of that total, or about 700 aircraft worth some $36 billion, says John Wojick, a vice president in Boeing's commercial-airplanes division.

If it fails, Varig will join the ranks of airlines that fell victim to mismanagement and competition during the past few years: Transbrasil stopped flying in 2001, and Vasp was grounded in January.

The company's first challenge is to come up with cash. It is trying to head off International Finance Leasing Corp., a unit of American International Group Inc., from seizing 11 of its 78 Boeing jets because it fell behind in lease payments. Fourteen Varig jets are grounded because the carrier lacks money for new parts or maintenance. Varig also regularly falls behind on salaries for its 17,000 workers.

The company is looking to raise about $100 million by selling its logistics division to U.S. private-equity fund Matlin Patterson. But the deal is being challenged in court by workers and pilots who complain the company is getting shortchanged. Varig's aircraft-maintenance division is also on the block.

To lead its rescue effort, Varig in July named Mr. da Cunha, a former Royal Dutch Shell and AT&T Corp. executive, as CEO. He quickly cut off service to some far-flung destinations in order to make aircraft available in areas of bigger demand. The company also is reducing the number of destinations it serves in South America.

The prospect of bankruptcy is producing big changes in an airline that once boasted of winning awards for the best selection of wine on board and best toilet kit. "It is of no use to offer a five-star service on a 40-minute flight when the customer is looking for frequency and price," Mr. da Cunha says.

---

Daniel Michaels in Paris contributed to this article.

can you find something about the new runway 17R on Arturo Merino Benitez International - SCL ?????

Brazil Airlines Show 29% Rise in Passenger Miles Yr-On-Yr
7 October 2005

SAO PAULO (Dow Jones)--Paying passengers on Brazil's domestic airlines flew a total of 2.92 million kilometers in September, up 29.2% from September 2004, according to monthly figures published late Thursday by Brazil's Civil Aviation Department, or DAC.

No-frills operator Gol Linhas Aereas (GOL) surpassed Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, assuming the second position in market share, while Brazil's largest domestic carrier, Tam SA (TAMM4.BR), maintained its leadership in the market.

Gol showed a strong performance in September, with a market share of 28.8%, surpassing Varig, which dropped to the third position with 25.4% of market share.

In the meantime, Tam maintained its leadership with a market share of 43.20% in September. Smaller airlines accounted for the remaining 2.6% of the market, according to DAC data.

The number of passengers traveling on domestic routes is growing faster than capacity, which grew 17.3% in September, compared with a year ago, according to DAC.

The combination of more passengers and proportionately fewer seats pushed average load factors in Brazil to 71%, with Tam showing 70% utilization, Varig 70% and Gol 76%.

Varig and Tam have both seen load factors rise since they ended a code-sharing agreement earlier this year.

In the meantime, while Tam and Gol have enjoyed an increase in the number of passengers, Varig has confronted mounting difficulties.

Varig, which has a total debt of 7.7 billion Brazilian reals ($3.36 billion), may see more of its jets grounded because of lack of maintenance, according to local reports this week.

In September, Varig presented a business plan to a Rio de Janeiro bankruptcy judge designed to reorganize the company and attract new investors.

Chile's LAN orders 25 Airbus A320 planes

PARIS, Oct 11 (Reuters) - European planemaker Airbus said on Tuesday that Chile's LAN Airlines had placed firm orders for 25 planes from its A320 family plus options on an additional 15 aircraft.

Deliveries will start in 2006. LAN, Chile's leading carrier, now has a total Airbus order backlog of 36 aircraft and the new planes will replace its fleet of Boeing 737-200 jets.

The additional planes will be powered by the V2500-A5 engine of International Aero Engines -- a company owned by Pratt & Whitney , Rolls-Royce Plc , Aero Engines Corp of Japan and MTU Aero Engines .

LAN unveiled its intention to order the Airbus aircraft in late June and said the 25 planes represented a list value of $750 million.

LAN said last week passenger traffic rose 15.4 percent in September from the same month last year, due to booming international travel.

LAN is one of the biggest airlines in Latin America and has affiliates in Peru, Ecuador and Argentina.

Brazil Court Grants Bankruptcy Protection To Airline Vasp
11 October 2005

SAO PAULO (Dow Jones)--A Brazilian court late Monday approved a bankruptcy protection petition filed earlier this year by grounded airline Viacao Aerea de Sao Paulo SA (VASP3.BR).

Vasp, which is saddled with heavy debts, stopped flying passenger routes in January. However, it continued to operate a cargo transport unit until Brazil's Civil Aviation Department, or DAC, closed the company completely in March.

According to local press reports, the company has total debts of 3 billion Brazilian reals ($1.33 billion).

"Our idea is to transform Vasp into a low-cost company," Vasp's government-appointed manager, Raul de Medeiros, was quoted saying by local news agencies.

Under bankruptcy protection, the company will have 60 days to present a recovery plan to creditors under Brazil's new bankruptcy law. New bankruptcy legislation took effect in June. Previously, it was difficult for companies to gain protection from creditors, and they could be forced to liquidate assets by judicial order.

Vasp has been experiencing financial difficulties since the 2001 recession that hit the industry and suffered a dramatic loss of market share in 2004.

In January, the company was obligated by DAC to stop operating regular flights because of worries about maintenance.

The latest news came amid a recovery for the industry in Brazil. According to DAC, paying passengers on Brazil's domestic airlines flew a total of 2.92 million kilometers in September, up 29.2% from September 2004.

French forensics arrive in Venezuela with results of DNA tests from plane crash
14 October 2005

MARACAIBO, Venezuela (AP) - A French forensic team presented to Venezuelan authorities Friday the results of DNA tests confirming the identities of victims in an August plane crash that killed all 160 people aboard, mostly from the French Caribbean island of Martinique.

The meeting between the French forensics and Venezuelan military officials in the western city of Maracaibo is a step prior to completing repatriation of the victims' remains, said Roxana Portillo, spokeswoman at Maracaibo Air Base. Officials refused to give further details.

The West Caribbean Airways plane was returning to Martinique after a chartered trip to Panama when it crashed on Aug. 16 in a remote part of western Venezuela.

The remains of the eight Colombian crew and three other victims were sent home earlier. Those of the remaining 149 victims are scheduled to be sent to Martinique on Oct. 29.

A plane carrying coffins was being sent from Paris to help with the repatriation, officials said.

Repatriation has been delayed by difficulties in identifying the bodies, most of which were torn up in the crash.

Lt. Col. Lorllys Ramos Acevedo, chief of the Venezuelan crash investigation board, said Friday that "still nothing is clear" about the cause of the accident.

West Caribbean Airways, a small Colombian airline, has said it did not cut corners on safety and that the jet passed a safety inspection the day before it crashed.

Venezuelan officials have said they don't believe weather was a factor in the accident.

The plane's flight data recorder and cockpit voice recorder were flown to France for analysis, the results of which have not been released.

Brazil Airline TAM Plans Share Offer, NYSE Listing -Report
17 October 2005

SAO PAULO (Dow Jones)--Brazilian airline TAM (TAMM4.BR), the country's largest domestic airline, is planning a new offer of shares and a listing on the New York Stock Exchange in early 2006, financial newspaper Valor Economico reported in its Monday edition.

The company, which in June raised 543.4 million Brazilian reals ($241.9 million) through the sale of 30.190 million shares, is planning to sell additional shares, according to the newspaper. Five investment funds that currently hold a 19.54% stake in the company will sell their shares as part of the new offer, Valor said.

According to the newspaper, the company also is planning to list its shares on the New York Stock Exchange.

Currently, TAM is controlled by Brazil's Rolim family, which holds a 58.86% stake.

The company declined to comment on the report when contacted by Dow Jones Newswires Monday.

On Friday, Tam's shares closed at BRL20.00. That's up from the initial public offering price in June of BRL 18.00.

Brazil Gol Airline Receives Its 39th Boeing 737 Aircraft
17 October 2005

SAO PAULO (Dow Jones)--Brazilian no-frills airline Gol Linhas Aereas (GOL) announced Monday that it has received its 39th Boeing 737 aircraft, maintaining its estimate to end 2005 with a total fleet of 42 jets.

So far this year, the company has added a total of 12 aircraft to its fleet of 39 planes. The company is expected to increase its existing fleet to 86 aircraft by the end of 2010.

In September, Gol surpassed Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, to assume second place in market share in Brazil behind TAM (TANC4.BR). Gol's market share in September was 28.8%.

Portugal TAP Still Wants To Invest In Brazil's Varig-Paper
21 October 2005

SAO PAULO (Dow Jones)--Portugal's state-owned TAP Air Portugal (TPA.YY) airline is still interested in investing in Brazilian flagship carrier Varig (VAGV4.BR) and could inject an initial $100 million into the company, said Varig President Omar Carneiro da Cunha, quoted by local financial daily Valor Economico in its Friday edition.

According to Cunha, TAP has relayed its interest through TAP President Fernando Pinto. Varig could offer its engineering and maintenance division, called VEM, as collateral in a capital injection by TAP, said Cunha.

Meanwhile, Cunha said he will travel personally to the U.S. to negotiate Varig debts with creditors.

Varig has struggled under the weight of a 7.7 billion Brazilian reals ($3.42 billion) debt load. The company has said BRL4.5 billion of the total is owed to the government as tax and social-security arrears.

Earlier this week, in an attempt to aid Varig, Brazil's National Development Bank, or BNDES, told potential investors it was willing to provide credit to buyers of certain Varig assets. BNDES said it would provide a special credit line to buyers of Varig subsidiaries VarigLog and VEM.

The BNDES said the airline, currently in the midst of a bankruptcy procedure, needs the equivalent of $62 million in the short term to maintain operations through 90 days of due-diligence by accountants. The BNDES said sale of Varig's cargo and maintenance assets would help in meeting such financial needs.

Along with TAP and BNDES, other groups have made proposals designed to save the airline, including Varig's current management, the airline's pilots union and local investor Nelson Tanure.

Varig also is suffering from a lack of maintenance on its jet fleet, which could result in almost half of the aircraft being grounded soon, according to local press reports.

And, according to official figures, Varig lost the second position in market share in Brazil to low-cost rival Gol Linhas Aereas SA (GOL) in September.

LatAm Airliners Poised To Soar On Strong Passenger Growth
By Claudia Assis
Of DOW JONES NEWSWIRES
21 October 2005

NEW YORK (Dow Jones)--Even with profit margins squeezed by higher jet fuel prices, airlines from large markets in Latin America are seeing their prospects for earnings growth climb steadily higher.

Such are the advantages of doing business in a part of the world where flying is still synonymous with affluence, but where large swaths of the population are joining the middle class, and able to skip the bus and purchase airfare.

Moreover, traditional state-owned "legacy" airliners are making way for new, and profitable, budget carriers.

"The sector does look attractive," said Urban Larson, who manages about $200 million in Latin American equities at Baring Asset Management in Boston.

There's an attractive market in Latin American countries such as Brazil and Mexico, where airfares - and demand - are still quite high, said Larson, who noted he holds positions in the sector but declined to be more specific about them.

He sees particularly good prospects for budget airlines in the region, unlike in many developed markets, where passenger growth prospects are far more limited.

"Clearly, that's where the growth is," he said. Latin Americans who couldn't afford flying before are stepping into planes now, thanks especially to no-frills airlines such as Brazil's Gol Linhas Aereas Inteligentes (GOL).

The number of passengers on commercial flights in Latin America in August, the latest month for which figures are available, totaled 6.9 million, an increase of 14.7% on year, according to the Miami-based International Air Transport Association for Latin America.

Mexico has two operating no-frills airlines, Avolar and Click Mexicana, a unit of legacy, government-controlled Mexicana, and others are in the works. A third Mexican budget air carrier, Aerolineas ABC Interjet, said recently it plans to take off in December.

In addition, the Mexican government plans to sell later this year its stakes on Mexicana and Mexico's other legacy airline, AeroMexico. Both companies enjoyed for decades a near-duopoly in domestic air travel.

While Spain's heavyweight carrier Iberia Lineas Aereas de Espana SA (IBLA.MC) has dropped out of the bidding for Mexicana and AeroMexico, several others are expected to bid, said government airline holding company Cintra SA (CINTRA.MX), which controls the two airlines.

Gol, Brazil's only budget airline, has announced its interest in entering the Mexican market as well, possibly partnering with a Mexican company.

Gol has enjoyed being the sole no-frill option in its native Brazil, but its entrance in Mexico would not be without a hitch, said Citigroup analyst Steve Trent. "Mexico is a different story because there seems to be a number of players that want to do the same thing that Gol does," Trent said.

Gol not only didn't face competition in its business model, but also took advantage of the dismantling of failed air carriers Viacao Aerea de Sao Paulo, or Vasp, and Transbrasil. It has also indirectly benefited from the problems with debt-laden Viacao Aerea Rio Grandense, or Varig (VAGV4.BR), which filed for bankruptcy in June.

While high oil prices have been a tough pill for airlines across the region to swallow, Gol is in a better position than most because of its price structure, a strong balance sheet and a solid leadership, Trent said.

"Gol has a winning model in our view. Earnings momentum is impressive," he said.

Both Gol and Chile's Lan Airlines SA (LFL) are on track for growth, said Ben Laidler, an analyst with UBS Investment Research in Santiago.

Lan, Chile's flagship carrier, is trying its hand in neighboring Argentina. It recently started five routes within Argentina and started its first international route, the profitable Buenos Aires-Miami.

It is safe to say that Lan's expansion to Argentina is going pretty well, Laidler said. The company wants to enjoy a 30% market share by the end of next year and is well on track to reach that goal, he added.

Argentina's legacy carrier, Aerolineas Argentinas (AR.YY), is not much of a concern for Lan, Laidler noted. Lan has newer planes, offers a better web of routes than Aerolineas Argentinas and is part of the OneWorld Alliance - a grouping of eight airlines that, in addition to Lan, includes Aer Lingus, American Airlines, British Airways, Cathay Pacific, Finnair, Iberia and Qantas Airways.

"It was a well-thought through expansion," Laidler said.

One of the advantages of Lan over other carriers is the Chilean company's cargo business, which represents 45% of the airline revenues, he said. Unlike the passenger business, it is standard practice in the cargo area to charge surcharges for oil price hikes, and Lan has been doing it for years. "It gives Lan a de facto fuel hedge," Laidler said.

Apart from sure winners like Gol and Lan, smaller airlines in the region are tougher bets, Laidler said.

Because they are in smaller markets, they tend to be less efficient, fly older, less fuel-efficient planes and have fewer coveted routes.

The dynamics of a smaller market also preclude other budget airlines from coming to Latin America, excepting Mexico and Brazil, Laidler said.

The no-frills model works best in larger markets. Elsewhere, "you just don't have that many cities to connect," he said. The budget airline model also relies on secondary airports, and many cities in Latin America don't have secondary airports available.

In the medium-term, UBS' Laidler sees Gol adding at least a couple of international routes and Lan tweaking the Argentine expansion.

Margins will be squeezed by jet fuel prices, "but these guys seem to be weathering the storm so far."

Varig rescue plan to be presented today
By JONATHAN WHEATLEY
24 October 2005
Financial Times

A last-minute rescue package for Varig, the indebted Brazilian airline, is expected to be presented to a New York bankruptcy court today by Brazil's government-owned development bank, Portuguese airline TAP and Matlin-Patterson, a US distressed equity fund.

Varig, under bankruptcy protection in Brazil from creditors owed about Dollars 3.3bn, is fighting to retain 20 aircraft that leasing companies have threatened to sequester after the airline failed to make payments of about Dollars 62m. Fifteen of its 76 aircraft are grounded for lack of maintenance. The court has given Varig until November 11 to present plans to meet its short-term debts with leasing groups.

The development bank, known as the BNDES stepped in last week, reportedly after President Luiz Inacio Lula da Silva insisted to ministers that Varig should not be allowed to collapse. The BNDES offered to provide the Dollars 62m needed in the short term in finance for a special purpose company that would be established by private investors to buy Varig's cargo company,VarigLog, and its aircraft maintenance company, VEM.

Under the BNDES plan, the SPC would buy two-thirds of the shares in Varig-Log and VEM. Following due diligence, the BNDES may provide additional finance to meet the full purchase price, should it exceed Dollars 62m. Both TAP and Matlin-Patterson, separately, have expressed interest in taking part and will join the BNDES at the bankruptcy court today.

Mr Lula da Silva's decision that the BNDES should intervene reportedly overruled the finance ministry and senior executives at the BNDES, who were willing to leave Varig's future in the hands of the market.

Those who opposed the plan reportedly argued there was little guarantee that the BNDES would be repaid, and that the plan would set a precedent. Vasp and Transbrasil, long-time competitors of Varig's, have stopped flying after failing to reach agreement with creditors.

Varig has announced that 1,500 of its 12,000 staff would be cut as part of a plan to reduce expenditure by Dollars 168m a year and increase revenues by Dollars 307m from the current Dollars 2.2bn. The plan involves creating a "new" Varig to operate Varig's airline services, leaving an "old" Varig with the company's assets and liabilities. The new Varig would pay the old company for use of the Varig name and for use of aircraft and other assets.

Chile Lan Airlines Seen Posting Sharp Fall In 3Q Net Pft
By Patricia San Juan
24 October 2005

SANTIAGO (Dow Jones)--Surging fuel costs are expected to have driven third-quarter net profit sharply lower on the year at Chilean airline Lan SA (LFL).

According to a Dow Jones Newswires survey of six analysts, the country's top carrier likely earned a third-quarter net profit of $21.2 million, down 41.8% from $36.4 million in the same period last year, despite higher sales.

Net profit estimates ranged from $20.0 million to $21.8 million.

"The rise in fuel costs basically explains the fall in profit," said Rodrigo Martin, an analyst at Santander Investment.

Last week, Chief Executive Enrique Cueto said the surge in international oil prices will raise Lan's fuel costs by some $150 million this year.

According to the carrier, fuel costs represented 22% of its total costs in 2004. In the first half of this year, that rose to 25%, or $279 million.

The company said it spent $84 million more for fuel in the first half of 2005 compared with the same period in 2004.

It has begun charging $10-$50 distance-based surcharges on flights to mitigate the blow, but the price of fuel will continue to pose the principal risk to the company's earnings, said analysts. Cueto himself has said the measure won't offset the cost increase.

The airline is one of the largest in the region, with units in Chile, Argentina, Peru, Ecuador and the Dominican Republic. It also is the largest cargo carrier in Latin America.

On June 8, it launched its Argentine unit, whose operations will begin to contribute to company earnings in the coming quarters, analysts said.

Still, the jump in fuel costs outpaced improved sales, they said.

Lan's sales likely rose 15.4% to $610.0 million from $528.8 million in the third quarter of 2004, boosted largely by the rise in international passenger and cargo traffic, the analysts said. Their estimates for sales ranged between $596.0 million and $620 million.

Healthier regional economies led to rising numbers of passengers and freight, along with the depreciation of the dollar against local currencies that spurred cross-border travel, according to analysts.

Lan's passenger traffic rose 32.3% on the year in the first nine months on the back of a 36.9% increase in international travel, it reported early this month.

Cargo traffic rose 21.0% overall, also outpaced by cross-border traffic, which increased 21.1% on the year in the January-September period.

The company must report its third-quarter and nine-month results by Oct. 30.

Portugal Airline TAP Eyes Help For Brazil's Varig -Report
25 October 2005

SAO PAULO (Dow Jones)--Portugal's state-owned TAP Air Portugal (TPA.YY) airline made a proposal to invest up to $500 million to restructure Brazilian flagship carrier Varig (VAGV4.BR), financial daily Valor Economico reported in its Tuesday edition.

TAP's proposal was made through a bankruptcy court in New York, the newspaper said.

Varig, which filed for bankruptcy in June, has struggled under the weight of a 7.7 billion Brazilian reals ($3.4 billion) debt load. The company has said BRL4.5 billion of the total is owed to the government as tax and social-security arrears.

TAP said that it wants to participate in a recovery plan launched recently by Brazil's National Development Bank, or BNDES.

Under the plan, BNDES told potential investors it was willing to provide credit to buyers of certain Varig assets. BNDES said it would provide a special credit line to buyers of Varig subsidiaries VarigLog and VEM.

According to BNDES, Varig needs the equivalent of $62 million in the short term to maintain operations through 90 days of due-diligence by accountants. The BNDES said the sale of Varig's cargo and maintenance assets would help in meeting such financial needs.

Along with TAP and BNDES, other groups have made proposals designed to save the airline, including Varig's current management, the airline's pilots union and local investor Nelson Tanure.

In addition to the heavy debt load, Varig also is suffering from a lack of maintenance on its jet fleet. The maintenance woes could result in almost half of Varig's aircraft being grounded soon, according to local press reports.

Furthermore, Varig in September lost its grip on second place in Brazilian market share to low-cost rival Gol Linhas Aereas SA (GOL), according to official figures.

Brazil's TAM Air Seeks Authorization For London Flights
28 October 2005

SAO PAULO (Dow Jones)--Brazilian airline TAM (TAMM4.BR), the country's largest domestic airline, has asked for authorization to operate flights to London, the company said Friday in a statement.

TAM said the company has asked permission from both domestic and international agencies. The company did not offer a timetable for obtaining authorization.

The company recently announced the start of flights to New York.

In September, according to Brazil's Civil Aviation Department, TAM maintained its leadership in the Brazilian market with a market share of 43.2%, while traditional flag carrier Varig lost its second-rank position to no-frills operator Gol Linhas Aereas (GOL).

Airplane carrying the remains of 145 jet crash victims arrives in Martinique
By HERVE BRIVAL
29 October 2005

FORT-DE-FRANCE, Martinique (AP) - An Air France cargo airplane returned the remains of 145 plane crash victims to Martinique on Saturday, more than two months after their jet crashed in a remote part of Venezuela.

The victims had been on vacation in Panama and were returning home to Martinique on Aug. 16 when their jet crashed. All 152 passengers and the eight-member Colombian crew were killed. The victims' remains had been kept in Venezuela, while authorities tried to confirm their identities.

A crowd of about 100 relatives and dignitaries waited on the tarmac at the Lamentin Airport in the capital, Fort-de-France, as the plane taxied to a stop.

All 145 coffins were unloaded and then grouped and arranged by family and by village. Four sets of remains were still in Venezuela because they have not yet been identified.

The ceremony consisted of a brief moment of silence, there were no speeches, and the victims awaiting identification in Venezuela, were represented by their photos.

After the ceremony, France's Minister of Overseas Departments, Francois Baroin, spoke with family members as they stood near the coffins of their loved ones. He declined comment to the press.

One of the relatives, Christian Cabrera, 45, lost his brother and sister-in-law in the accident.

"I thought I was strong but when I saw the coffins, I burst into tears," he said. "I think of my parents who are waiting for the remains."

As the funeral procession made its way out of the airport, a line of 145 hearses and several cars carrying family members, people on the side of the road bowed their heads in respect as they drove by.

Maurice Antiste, mayor of the village of Francois where many of the victims were from, lost his brother, a sister, his niece and his sister in law in the crash.

"This is not easy for me, but I must be strong for the rest of my family and for the people of Francois who lost so many relatives in this crash," he said.

France's ambassador to Venezuela, Pierre-Jean Vandoorne, called the crash the "most painful" tragedy in the history of Martinique.

Shortly before the plane went down, the pilot had radioed authorities to report that both engines on the McDonnell Douglas MD-82 had failed.

The jet plunged to the ground in a remote area south of Maracaibo, shattering much of the fuselage and making the identification of victims particularly difficult, officials said.

Martinique is a department of France, and French and Venezuelan experts were continuing to investigate what caused the crash. The results of examinations of the plane's flight date and voice recorders could be made public in one month.

Peru Air Traffic Controllers Threaten Partial Strike
31 October 2005

LIMA (AP)--Commercial air traffic controllers threatened Monday to begin a partial strike over equipment maintenance, owed back wages and other grievances, as aviation authorities said air force controllers would step in to prevent any disruption of flights.

Dante Samaniego, secretary general of the Unified Air Traffic Controllers of Peru, told The Associated Press that by law his 170-member union was prevented from staging a total walkout.

But he said if demands were not met by 11 p.m. local time (0400 GMT), controllers would indefinitely reduce their numbers in control towers and flight centers from 36 per eight-hour shift to a mandated minimum of 22 at Peru's 17 airports.

Betty Maldonado, a spokeswoman for Peru's aviation authority, CORPAC, told AP that "all precautions had been taken to ensure that service will not be affected."

A contingency plan was in place for Peruvian Air Force controllers to "reinforce" air traffic controls, she said.

The air traffic controllers said in a statement that revenue from the concession of Lima's Jorge Chavez international airport had not been used to adequately "maintain, upgrade, change and install new equipment" on a national level.

The statement cited a "gradual deterioration of aviation infrastructure and airports."

"I wouldn't say it is dangerous, but there is a need for immediate attention because the problem is mounting and it can become dangerous," Samaniego said.

The controllers also are demanding back pay they say is owed them from 1997 through 2003 and the rehiring of a union employee they claim was unfairly fired more than a year ago.

"We have exhausted all means to resolve these problems," Samaniego said. "We are still waiting for any information, any invitation from (CORPAC) to sit down for talks and find a solution."

Brazil's Varig Accepts TAP Partnership Proposal
1 November 2005

SAO PAULO (Dow Jones)--Brazil's embattled flagship airline, Viacao Aerea Rio-Grandense, or Varig, (VAGV4.BR) chose to accept a proposal by TAP Air Portugal (TPA.YY) to be its partner in the first stage of the restructuring of the debt-ridden company, Varig said in a press statement issued late Tuesday.

Varig will now send the proposal to the Brazilian National Development Bank for approval.

TAP will deposit $62 million into the accounts of leasing firms to avoid the repossession of 20 to 40 Varig airplanes, thus giving Varig time to restructure the rest of the company's debt, according to the statement.

Varig filed for bankruptcy in July under the weight of approximately 7.7 billion Brazilian reals ($3.4 billion) in debts. The company said TAP undertook to make the deposit before the Nov.9 deadline set by a New York bankruptcy court to conclude negotiations.

Last week, Varig invited investment proposals from six firms that showed interest in the debt-saddled airline: TAP Air Portugal (TPA.YY), Brazil's Docas Investimentos S/A, U.S. investment fund Matlin Patterson, Brazil's Ocean Air, a consortium of Varig employees and French maintenance group ATS. According to local media reports, Docas and the Varig employee consortium have dropped out.

Under a restructuring plan proposed by the BNDES last week, the new partner would take over Varig's profitable logistics and maintenance subsidiaries, VarigLog and Varig Engenharia e Manutencao, in return for making the $62 million deposit. The government bank would then fund the purchase. However, Varig did not say if the TAP proposal involved buying the subsidies.

According to the Varig statement, the Rubem Berta foundation, which owns 56% of the company, chose to accept the Portuguese offer during a meeting on Tuesday afternoon, making the decision unanimous among Varig's board of directors.

TAP also reiterated its interest in taking part in the rest of the restructuring of Varig, and is willing to invest up to $500 million to put the company back on its feet, Varig said.

Brazil Airline Gol Seeks Expansion Amid Record Profits
1 November 2005

SAO PAULO (Dow Jones)--Positive third-quarter results have emboldened Brazil's low-cost airline, Gol Linhas Intelligentes SA (GOL), to pursue aggressive expansion plans over the next couple of years, company officials said Tuesday.

The new focus for the no-frills airline will be international routes in Latin America, with new flights scheduled from Sao Paulo to Santa Cruz, Bolivia in November, and to Assuncion and Montevideo over the next year.

"Our plan is to offer the same quality, low cost service abroad, while continuing to expand at home," said Constantino de Oliveira Jr., Gol's president, during a conference call Tuesday.

To attend the new markets, the airline plans to add 12 new Boeing 737 airplanes to the fleet in 2006, taking the total number of aircraft to 54 from a forecast 42 at the end of this year. This will lead to a 45% increase in available seat-kilometers.

Not only will there be more planes, they will be of greater capacity. The company will take four Boeing 737-300s, with a maximum capacity of about 149 seats, out of commission and bring in 12 Boeing 737-800s, with a capacity of about 189 seats.

The larger planes will afford major cost savings, not only because of economies of scale but also because they will be able fly longer routes, said Richard Lark, Gol's financial vice president.

Meanwhile, a reduction in the average age of the company's fleet, which is projected to fall to 4.8 years by 2007 from the current level of 8.5 years, will cause a dip in maintenance costs, he added. Maintenance costs will also be cut with the opening of Gol's own maintenance plant in the Minas Gerais state next year.

As a result, Gol forecasts it will be able to lower costs per available seat-kilometer by 4% next year.

"These cost cuts will allow us to continue our policy of cutting prices and generating demand for flights from people who aren't accustomed to flying," said Oliveira.

He forecasts that net revenues for 2006 will rise to about 4 billion Brazilian reals ($1.78 billion) from an estimated BRL2.8 billion to BRL3 billion this year.

Late Monday, Gol reported record net profits of BRL138.2 million, up 42.6% on the same quarter last year and well above market expectations. Investors reacted quickly to the news, with Gol preferred shares up 6.0% on the day at BRL41.57 on the local Bovespa market at 1700 GMT, outperforming the 1.3% gain on the Ibovespa index.

Oliveira boasted that the company is the world's most profitable low-cost airline, registering an EBITDA margin of 35.9% this year, compared with Ryanair's (RYAAY) margin of 34.3% and Southwest's margin of 19.3%.

High oil prices are expected to continue to weigh on the company's costs but Brazil's continued economic growth should stimulate new demand for local flights, said Lark.

Gol was forced to raise fares by 18% in October due to increased fuel costs, said Oliveira. However, the government-controlled fuel company, Petrobras, is expected to reduce aviation fuel prices by 10% to 14% in November, which will mean the company won't need to raise fares again and will allow it to reduce prices on certain routes, he added.

Despite expressing its aim to grab a larger share of Brazil's international market, Gol is working on the assumption that Brazil's embattled flagship airline, Viacao Aerea Rio-Grandense, or Varig, (VAGV4.BR) will maintain its position as leader in this market.

"International growth will be achieved based on existing bilateral agreements. We do not need to take over Varig's routes," said Oliveira.

Over the next couple of years, Oliveira predicted the competition will not be able compete with Gol's low fares indefinitely and there will be opportunities for the company to increase yields in the next couple of years.

Beyond 2006, Gol forecasts it will increase its fleet to 86 planes by 2010, while maintaining the rate of seat occupation at around 74% - the highest in the industry in Brazil.

Oliveira said Gol does not fear newcomers, such as Ocean Air, who are trying to repeat the success of the company's low-cost, no-frills model.

"They need to bring new attributes to the market. Otherwise it will be very tough to compete with a company that is already established," he said.

Peru Authorities Warn Striking Air-Traffic Controllers
3 November 2005

LIMA (AP)--Aviation authorities on Thursday threatened to fire commercial air traffic controllers three days into a partial strike over equipment maintenance and other grievances, saying the strike was illegal and posed safety threats.

Carlos Albuquerque, president of Peru's aviation authority, Corpac, told reporters that the Labor Ministry had declared the strike illegal and said controllers would be fired if they didn't return to their normal work schedules.

"They are threatening safety," Albuquerque said of the 170-member controller's union, which on Tuesday morning reduced its numbers in control towers and flight centers from 36 per eight-hour shift to 22 in Peru's 17 airports.

Dante Samaniego, Secretary General of the Unified Air Traffic Controllers of Peru, told The Associated Press his union didn't stage a total walkout in order to stay within the boundaries of Peruvian law, which he said stipulates a minimum of 22 controllers nationwide. The controllers have three days to challenge the Labor Ministry's conclusion, he said.

Samaniego said that despite the threatened firings, his union would continue its action "until Corpac decided to put something tangible forward, a working proposal." He warned that the replacement personnel that Corpac had put in the control towers weren't adequately trained.

Corpac officials said ahead of the strike that a contingency plan was in place to use controllers from Peru's Air Force to ensure that commercial flights wouldn't be affected.

"We are putting in place all resources so that security is guaranteed," Albuquerque said. "As a result of the professionalism of the people who are taking care of air traffic in the country we have had no cancelations of national or international flights."

Albuquerque denied the controllers contention that a lack of funding and maintenance was causing a "gradual deterioration of aviation infrastructure and airports."

"You can go to any airport in the country and perhaps there might be a delay, but operations are being properly handled," he said. "Our equipment is functioning at 100%."

The air traffic controllers said in a statement that revenue from the concession of Lima's Jorge Chavez international airport hadn't been used to adequately "maintain, upgrade, change and install new equipment" on a national level.

The controllers also are demanding back pay they say is owed them from 1997 through 2003 and the rehiring of a union employee they claim was unfairly fired more than a year ago.

Portugal's TAP to buy subsidiaries of Brazil's struggling Varig airline
7 November 2005

SAO PAULO, Brazil (AP) - Portugal's TAP airline plans to take over two subsidiaries of Brazil's struggling Varig airline and help the Brazilian carrier pay off its multibillion-dollar debt, a lawyer for TAP said Monday.

TAP Air Portugal plans to pay US$62 million Tuesday for VarigLog and VEM, the profitable cargo and maintenance subsidiaries of Brazil's flagship airline, Jose Roberto Opice said.

The money will be used to pay off Varig debts with leasing firms that have threatened to repossess 20 to 40 aircraft, he said.

"We have made the offer to help recuperate the company, and we expect the creditors (will) accept it," Opice told Dow Jones newswire by telephone from Rio de Janeiro.

The sale is part of a plan to allow Viacao Aerea Rio-Grandese, or Varig, to keep flying while it restructures its debts. Varig's debts total some 7.7 billion Brazilian reals (US$3.4 billion), and forced the company to file for bankruptcy in July.

Meanwhile, the leasing firms separately filed bankruptcy proceedings against Varig in a New York court, which gave the company until Wednesday to pay the US$62 million debt.

TAP has set up a Brazilian firm, Aero-LB Investimentos S.A., to receive financing from Brazil's government-run development bank, or BNDES. The bank reportedly will finance US$42 million of the US$62 million TAP would pay for VarigLog and VEM.

Creditors In Brazil's Varig Approve TAP Bailout Deal
8 November 2005

SAO PAULO (Dow Jones)--Creditors in embattled Brazilian airline Viacao Aerea Rio-Grandese (VAGV4.BR), or Varig, voted overwhelmingly in favor of accepting a proposal by TAP Air Portugal (TAP.YY) to take over Varig's profitable cargo and maintenance subsidiaries for $62 million, a Varig press spokeswoman said Tuesday.

However, an assembly of creditors in Rio only voted after twelve hours of discussions and the intervention of the Brazilian National Development Bank, or BNDES, to convince wavering voters, she added.

The sale of the subsidiaries is designed to allow the company to continue operating while it forms a plan to restructure its debts. Varig filed for bankruptcy in July under the weight of BRL7.7 billion ($3.4 billion) in unpaid commitments.

The company needs $62 million pay off leasing firms that have threatened to repossess 20 to 40 aircraft. A New York bankruptcy court had set a deadline of Nov. 9 for Varig to stump up the cash.

TAP will deposit the funds Tuesday, said Jose Roberto Opice, a TAP lawyer.

BNDES will finance $42 million of the purchase, according to a proposal submitted to the assembly. TAP has already set up a Brazilian firm, Aero-LB Investimentos S.A., to receive the BNDES money.

Aero-LB was set up with a Macau-based investment fund GeoCapital and an unnamed Brazilian investor.

"But the guarantor of this operation is TAP," Fernando Pinto, TAP president, told the creditors.

The airline sector unions and the Varig workers' group abstained on the vote, complaining at a lack of information about the investment company and other aspects of the proposal.

For years, Varig has been the leading Brazilian airline, but increased competition from low-cost rival Gol Linhas Aereas SA (GOL) meant it lost second place in the Brazilian domestic market in September.

Peru Air Traffic Controller Strike Continues
8 November 2005

LIMA (Dow Jones)--Commercial air traffic controllers remained on strike Tuesday, a spokeswoman from Peru's Corpac civil aviation authority said.

Air traffic controllers walked off the job Oct. 31 demanding, among other things, that revenue from the Jorge Chavez International Airport in Lima be used to upgrade and install new equipment and runways. Also among their grievances, they claim they are owed back pay.

Only emergency crews were left in place.

"The strike is still on. They have stepped up their measures. But, Corpac is always open to dialogue and talks continue," said spokeswoman Betty Maldonado.

In a statement late Monday, the Air Traffic Controllers of Peru union said it would hold two marches Tuesday to lobby the government to meet its demands.

Meanwhile, according to Maldonado, all precautions have been taken to ensure that the service isn't affected in airports across the nation.

On Tuesday, Corpac said in a statement that it "guarantees safety" in all of Peru's airports and that to date no flights have been canceled

It stated that, among other things, it has implemented a contingency plan to ensure a round-the-clock service at Lima's airport with licensed air traffic controllers. "Air operations are completely normal," it said.

Brazil Airline Varig Names New Chairman, Board Pres
21 November 2005

SAO PAULO (Dow Jones)--Debt-laden Brazilian airline Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, on Monday appointed a new chairman and two new directors to its board, including the board's president.

Marcelo Bottini, who has worked at Varig since 1979, will assume the post of chairman, replacing David Zylberstajn.

Humberto Rodrigues Filho, a retired Varig worker, will assume the presidency of the company's board of directors, replacing Omar Carneiro da Cunha. Sergio Bruni will replace Eleazar de Carvalho on Varig's board.

Varig said late Friday that Fundacao Rubem Berta, which owns a majority of the airline's shares, decided to replace the three executives after Varig workers demanded changes in the wake of the company's decision to fire more than 100 pilots.

Varig has suffered severe financial difficulties since the airline industry went into a worldwide recession in 2001. Varig's net debt is estimated at about 7.7 billion reals ($3.47 billion).

In the first nine months of 2005, Varig posted a net loss of BRL778.1 million against a net loss of BRL305 million in the same period a year earlier.

The company also has seen a continued drop in its market share, resulting in the loss of the No. 2 position in the domestic market to Gol Linhas Aereas SA (GOL).

Aerolineas Argentinas flights hit by strike

BUENOS AIRES, Argentina, Nov 25 (Reuters) - Argentina's flagship airline, Aerolineas Argentinas, canceled some international flights on Friday due to a strike by pilots and technicians, a company official said.

Employees walked off the job on Thursday to demand wage increases, causing delays and cancellations of domestic and international routes.

"All Aerolineas' flights were canceled up until 4 p.m. (1900 GMT)," an official at the airline said.

The airline flies to Miami, New York, Madrid and Rome as well as to 33 domestic destinations, according to its Web site. It was not immediately clear which flights had been affected.

Daniel Guiro, a leader of the pilots' union, said the pilots were asking for a 45 percent raise. "There is no date set for it (the strike) to end. This is going to continue until we find a solution," he told local radio.

Aerolineas Argentinas is 98 percent owned by Spanish group Interinvest and competes in the domestic market against Chile's LAN Airlines , which began operations in Argentina in mid-2005.

Govt Orders Partial Halt To Aerolineas Argentinas Strike
25 November 2005

BUENOS AIRES (Dow Jones)--The Argentine Labor Ministry ordered striking pilots of flagship carrier Aerolineas Argentinas (AR.YY) to return to work Friday, committing both sides to operating a minimum of 50% of domestic passenger flights.

The airline's pilots and mechanics unions launched a surprise strike Thursday afternoon, indefinitely grounding all flights and leaving thousands of passengers stranded.

After a Friday morning meeting at the Labor Ministry with Aerolineas Argentinas, the government imposed a "minimum service" requirement on the pilots and the company. Both sides must now guarantee 50% of scheduled domestic flights and 75% of international flights.

The pilots union says it is seeking a 45% increase in the base salary from its current 1,884 pesos ($634.34) a month, and that Aerolineas Argentinas has offered only a 4% raise.

When asked in a Friday television interview what the company was proposing, Aerolineas Argentinas spokesman Julio Scaramella said that the offer was far from what the unions are requesting. He also said the striking workers were jeopardizing the rest of the company with their actions.

"Eight thousand, five hundred people work here," Scaramella said. "We're not going to put everyone's jobs at risk for the demands of two unions."

The Labor Ministry issued a separate statement Friday saying the two striking unions failed to show up at the morning meeting. This showed "disinterest in attending to and taking up social dialogue with the responsibility and maturity demanded by the circumstances," the national director of labor relations, Jorge Schuster, said in the note.

According to government data, the two striking unions represent 2,000 employees, and there are 950 workers involved in the current conflict.

The Labor Ministry also intervened to order minimum service in early July, when Aerolineas Argentinas pilots went on strike on the eve of one of the busiest travel weekends of the year.

Aerolineas Argentinas Fires 168 Striking Pilots, Mechanics
28 November 2005

BUENOS AIRES (Dow Jones)--Flagship carrier Aerolineas Argentinas (AR.YY) has dismissed 168 pilots and mechanics that defied an Argentine Labor Ministry order to return to work, setting up a key test for the rule of law and balance of power between unions and the government.

The pilots and mechanics unions began a surprise strike Thursday afternoon, grounding Aerolineas Argentinas' passenger flights and stranding thousands of customers. The Labor Ministry ordered a "minimum service" requirement on Friday morning, committing both sides to guarantee 50% of scheduled domestic flights and 75% of international flights.

Aerolineas Argentinas said in a statement issued Sunday that it has sent pink slips to 168 employees that refused to comply with the minimum service order.

"The company will make the same decision for pilots and mechanics who, in the next shifts, persist in an attitude of not showing up at their posts, falling again into non-compliance with government orders," Aerolineas Argentinas said.

The heightened level of conflict in the airline strike hasn't been seen in other recent labor disputes, including those by hospital employees to truckers. The striking Aerolineas workers responded to the dismissals Monday morning by blockading the only highway that leads to the Ezeiza international airport.

It remains to be seen whether the unions will comply with the labor law, which also imposes a fine of 10 million pesos ($3.4 million) for failure to meet the minimum service requirement. In July, when Aerolineas Argentinas pilots also went on strike, the workers obeyed the government's minimum service order and returned to their posts.

Aerolineas Argentinas said it would be in constant contact with the Labor Ministry and senior administration officials on Monday morning, though the company acknowledged that finding a solution would be difficult. Union representatives had failed to attend a Friday meeting convened by the government.

Meanwhile, Aerolineas Argentinas said it is planning to shut down a maintenance center in Bahia Blanca because the absence of mechanics has made normal operations impossible. Austral, which is Aerolineas Argentinas' cargo carrier, hasn't been affected by the strike.

According to government data, 950 workers - nearly half of the membership of the two unions - are involved in the current conflict. The pilots are seeking a 45% increase in the base salary from the current 1,884 pesos a month.

Grounded Brazil Airline Vasp Registers Plan To Fly Again
28 November 2005

SAO PAULO (Dow Jones)--Brazil's grounded airline Viacao Aerea de Sao Paulo (VASP3.BR) registered its intentions to restructure its debt and restart operations at a Sao Paulo bankruptcy court last week.

The company has been prohibited from flying since January due to its heavy debts with suppliers, airports and the passenger aviation authority.

But in October, the Sao Paulo court granted bankruptcy protection to the company and it is expected to deliver its recovery plan to that court by Dec. 12, according to local business daily Valor Economico.

The provisional plan, set up by Sao Paulo-based Tendencias consultants, involves the company returning to operations with 27 planes, using a low-cost, no-frills model similar to that used by Gol Linhas Aereas Inteligentes SA (GOL).

The key question remains how the company will operate day-to-day without a major cash injection. The company will look to recuperate some of its debts by selling some of its property, said the press report.

The decline of Vasp has allowed Gol to expand rapidly in the domestic market. Over the past four years since its inception, it has raised its market share from nothing to 29%.

Vasp has approximately 3.5 billion reals ($1.58 billion) in debts.

Brazil's Airline Gol To Give Customers 3 Years To Pay
28 November 2005

SAO PAULO (Dow Jones)--Brazil's no frills airline Gol Linhas Aereas Inteligentes SA (GOL) will give passengers up to three years to pay for tickets in an effort to attract customers from lower income brackets, a company press release said.

An application for the tickets 15 days in advance will allow Brazilians to pay in 36 installments, subject to credit checks, it said.

"We always look to stimulate the market and create opportunities for more Brazilians to benefit from air transport," said Tarciso Gargoni, Gol's marketing vice president.

Gol became the country's first low-cost airline in 2001 and since then has registered breakneck growth. As of October, the airline had grabbed 28.7% of the domestic market, and the company claims to have attracted 3.5 million first-time flyers with its cheap prices.

Gol is looking to continue its high growth rate in the next five years, with plans to double its fleet to 86 planes by 2010 and increase the number of routes in Latin America. The company already flies to Buenos Aires and Santa Cruz de la Sierra in Bolivia, and plans to start flights to Asuncion, Paraguay, soon.

In addition, in the second quarter it expects to launch a low-cost airlines in Mexico with local partner Inversiones y Tecnicas Aeroportuarias SA, or IT.

French investigators say West Caribbean crash conclusion is 'hasty'

PARIS, Nov 28 (AFP) - A conclusion by the airline West Caribbean that ice on the wings of one of its planes was responsible for the August 16 crash in Venezuela that killed all 160 people on board was "hasty," French air accident investigators probing the crash said Friday.

The French Bureau of Inquiry and Analyses (BEA) said it "regrets that the operator is drawing hasty conclusions from this accident on the basis of just one of the elements plucked from the initial evaluations of the inquiry."

It added: "None of the elements from the inquiry allow this conclusion to be reached."

The BEA was reacting to a report in the Colombian newspaper El Colombiano on Sunday in which the director of West Caribbean, Jorge Perez, claimed that "the accident was caused by weather conditions, the loss of control due to an excess of ice on the wings."

Perez said that conclusions showed the plane "was not in bad repair as the media has insistently reported."

The newspaper also said that a report by the US National Transportation Safety Board noted that the pilots had discussed the bad weather and possibility of icing before the aircraft went down.

The crash of the twin-engine McDonnell Douglas MD-82 aircraft on a flight from Panama to Martinique killed 152 French passengers from Martinique and eight crew from Colombia.

The BEA said that, at this stage of the investigation, it was impossible to concentrate on one factor to the exclusion of all others.

A final report on the crash is not expected before several months.

TAP Vows To Deposit $40 Mln Loan To Varig - Report
29 November 2005

SAO PAULO (Dow Jones)--Portuguese airline TAP Air Portugal (TAP.YY) will deposit $40 million pledged to the debt-laden Brazilian airline Viacao Aerea Rio-Grandese (VAGV4.BR), or Varig, in the next two weeks, signalling the company's continued commitment to the restructuring of the local firm, TAP's president said late Monday, according to the local business daily Valor Economico

The loan was a rider on a deal, closed earlier this month, to buy control of Varig's profitable cargo and maintenance subsidiaries for $62 million. However, the deposit was put on hold last week after Fundacao Rubem Berta, which owns the majority of the airline's shares, decided to replace three top executives at the request of workers' representatives.

The problems with the controller have been resolved, said TAP President Fernando Pinto.

TAP is still the front runner to partner Varig in restructuring its debts, which are estimated at approximately 7 billion Brazilian reals ($3.18 billion).

Pinto reaffirmed TAP's offer to pump $500 million into the flagship Brazilian airline.

In July, a Brazilian court extended bankruptcy protection to Varig.

Argentine Airline Rents Aircraft To Operate During Strike
29 November 2005

BUENOS AIRES (AP)--Argentina's largest airline on Tuesday said it is renting aircraft from other companies to resume part of its operations idled by a six-day strike by pilots and mechanics.

Aerolineas Argentinas (AR.YY) also said 100 more strikers were fired, bringing to 337 the number of workers who have lost their jobs since the strike over salaries started.

Spokesman Julio Scaramella said the work stoppage has cost the company $8.5 million in lost income after being forced to cancel 258 domestic and international flights.

Scaramella said nearly 50,000 passengers have been affected.

"The company is renting airplanes from other companies in order to fulfill our obligations with those who have bought tickets," he said.

On Monday, strikers blocked the access to Buenos Aires' Ezeiza airport for several hours, forcing passengers of other airlines to haul their luggage several blocks to reach the airport.

Strikers are demanding a 35% salary raise and Aerolineas Argentinas has offered a 5% increase.

Five unions representing flight attendants and administrative employees did not join the strike.

Aerolineas Argentinas, formerly a state-owned company, was privatized 13 years ago and is now administered by the Spanish consortium Marsans. Along with its subsidiary Austral, the company accounts for about 80% of domestic commercial air traffic.

Aerolineas Argentinas Offers To Rehire Fired Strikers
30 November 2005

BUENOS AIRES (Dow Jones)--In an effort to jumpstart stalled negotiations and end a six-day strike, Aerolineas Argentinas (AR.YY) President Antonio Mata said Wednesday that the company will take back workers that had been fired during the labor conflict.

Mata said during a press conference that the company is willing to rehire the pilots and mechanics "in the spirit of being able to recover a dialogue." To be re-incorporated, the workers must comply with a government mandate to return to work while negotiations take place.

The executive put the number of dismissed employees at more than 300. Local media reports have cited a figure of 337 workers. On Monday, the company began sending pink slips to members of the pilots and mechanics unions that refused to return to their posts, flouting a government order to establish minimum service. In response to the dismissals, the workers blockaded the only highway connected to Ezeiza international airport.

The minimum-service requirement entails guaranteeing 50% of domestic flights and 75% of international flights. Mata said Wednesday that the company is meeting the minimum-service rule without compromising the safety of operations, though Aerolineas Argentinas has been forced to rent aircraft from other carriers because it doesn't have enough mechanics to perform maintenance on its own planes.

Mata still had tough words for the striking workers, however, blaming them for "chaos and a savage strike."

The airline "can't subject itself to capricious salary increases that the company can't pay out," Mata said.

Though he declined to quantify the company's wage proposal, Mata insisted it was well above the average salary for the commercial air traffic sector and said the unions are using bad data. The workers say the company has offered just a 5% increase, compared with the 35% they are demanding.

The Labor Ministry issued a resolution late Tuesday that orders the pilots and mechanics unions to obey the government order and return to work. The deadline is 11 p.m. local time. If the conflict persists, authorities could initiate legal action against the workers, Labor Vice-Ministry Noemi Rial said in a Wednesday morning radio interview.

Aerolineas Argentinas accounts for 80% of domestic air travel. Its controlling shareholder is Spain's Marsans group.

Argentina military to help stranded tourists

BUENOS AIRES, Argentina, Dec 1 (Reuters) - Argentina's military offered on Thursday to help rescue tourists stranded by a workers' strike at Aerolineas Argentinas, the country's Spanish-owned flagship carrier.

The eight-day-old strike by pilots and technicians -- who account for about 2,000 of the company's 8,500 workers -- has forced the airline to cancel or delay most of its flights, affecting more than 60,000 passengers.

Argentina's Air Force put its pilots and a Boeing-707 plane at the disposition of Aerolineas Argentinas, which will contribute its own flight attendant crews.

"This will relieve the situation a great deal because we will cover the entire southern region with this plane," company spokesman Julio Scaramella told local TV, mentioning favorite Patagonian tourist spots such as Calafate and Bariloche.

The airline, owned by Spain's Interinvest, flies to Miami, New York, Madrid and Rome as well as 33 domestic destinations. The striking workers are demanding a 45 percent wage hike, which the company has said would be impossible to grant.

Their demands echo similar appeals by workers at different industries throughout Argentina to compensate for inflation, which economists expect to surpass the government's target of 11 percent for 2005.

The president of the Association of Travel and Tourism Agents, Tomas Ryan, said foreign tourists have already canceled about 30 percent of their flights to Argentina for next year, which is seen slashing tourism earnings by some $1 billion.

Argentina's Labor Ministry on Thursday imposed fines totaling about $3 million on the two striking unions, after the groups refused to sit down to government-ordered obligatory talks to resolve the conflict.

Aerolineas Argentinas said it is losing 1 million pesos ($335,000) a day because of the strike.

Brazil's Varig Has Extra 20 Days To File Restructure Plan
1 December 2005

SAO PAULO (Dow Jones)--Brazil's embattled flagship airline Viacao Aerea Rio-Grandense (VAGV4.BR), or Varig, has an extra 20 days to present a debt restructuring plan after a Rio de Janeiro court said it had miscalculated the deadline, a spokesman for a Rio de Janeiro court said Thursday.

Varig now has until Jan. 8 to agree terms with a new partner and submit the plan.

The company filed for bankruptcy at a Brazilian court in June under the weight of a debt load of approximately 7.7 billion Brazilian reals ($3.4 billion).

Last month, Varig closed a deal to sell its profitable cargo and maintenance subsidies to a consortium led by Portuguese airline TAP (TAP.YY) for $62 million in order to avoid the repossession of a number of its jets in the U.S.

For years, Varig has been the leading Brazilian airline. It remains the dominant international carrier but increased competition from low-cost rival Gol Linhas Aereas AS (GOL) meant it fell to third in the Brazilian domestic market in September.

Aerolineas Argentinas Unions Suspend Strike
2 December 2005

BUENOS AIRES (Dow Jones)--Pilots and mechanics of Aerolineas Argentinas (AR.YY) suspended their eight-day strike on Friday and will return to their jobs, accepting an offer that the company sent the unions early in the morning.

The decision by the mechanics was unanimous, Juan Pappalardo, secretary-general of the union, said in live television interviews after a morning assembly to vote on the proposal.

Minutes later, pilots union spokesman Daniel Biro said his group had adopted the same resolution as their mechanic co-workers.

The employees will go back to work later in the afternoon and negotiations with the company will begin in earnest on Monday, Pappalardo said.

In an afternoon interview with cable news station TodoNoticias, Aerolineas Argentinas spokesman Julio Scaramella said operations should be fully back to normal by Tuesday.

The two sides haven't yet reached a new, long-term salary agreement, as the company's offer was an intermediate step to initiate negotiations and halt the strike.

The unions and company signed the accord Friday afternoon at the Labor Ministry. Aerolineas Argentinas will re-hire all of the 300-plus workers who had received pink slips during the strike, as well as 11 employees whose dismissal had been one of the causes of the labor conflict.

Aerolineas Argentinas will also make a one-off payment of 1,000 pesos ($355.29) for head pilots and 600 pesos for co-pilots. The two top categories of mechanics will receive 450 pesos, while the two lowest tiers will get 400 pesos.

The agreement also calls for a 90-day truce, during which the two sides must negotiate the remaining pending issues. This includes a revised base salary.

Union representatives said the terms are still far from what the workers were seeking. But the unions decided to suspend the strike after feeling that the government had changed its attitude.

"There was a change in negotiators for Aerolineas Argentinas that has totally changed the dialogue," Biro told reporters outside union headquarters. "The Labor Ministry has created the necessary environment for negotiations so that an accord can be reached. The accord will now be realized in the Labor Ministry."

Scaramella said Aerolineas Argentinas President Antonio Mata had opted out of the last round of negotiations, sending another senior executive in his place.

Biro was careful to point out that the strike hasn't been definitively lifted, as workers could walk off the job again in 90 days if the new round of negotiations fails.

The eight-day strike nearly paralyzed operations at Aerolineas Argentinas, which had to rent planes from other carriers to comply with a government order to guarantee minimum service. The company, which has a market share of 80% in domestic commercial air travel, lost about $12 million during the strike, Scaramella said.

Brazil Airlines See Nov Passenger Miles Rise 21% On Yr
5 December 2005

SAO PAULO (Dow Jones)--Paying passengers on Brazil's domestic airlines flew a total of 2.87 billion kilometers in November, up 21.1% in the same month last year, according to monthly figures published by Brazil's Civil Aviation Department, or DAC, Monday.

The increase in traffic was due to more flights being run by Brazil's largest local carrier, TAM SA (TAMM4.BR), and no-frills operator Gol Linhas Aereas (GOL) compared with last year

The growth occured despite a reduction in the average number of seats filled to 69% from 70% last year. The number of passenger kilometers fell from 3.18 million in October.

TAM remained the market leader in November, accounting for 43.8% of all passenger kilometers flown, which was the same as October and up from 39.2% last year. Meanwhile, Gol increased its advantage over Viacao Aerea Riograndense SA (VAGV4.BR), or Varig. Gol had 29.1% of the market last month compared with 23.9% registered in November 2004. Varig held 24.8% compared with 33.4% last year.

Gol and TAM both took advantage of a decline in Varig's passenger kilometers of 10.3% to 710,470. Varig continues to struggle under the burden of crippling debts. The company sought bankruptcy protection in June.

The number of kilometers flown by paying passengers on international flights run by Brazilian companies dropped to 1.909 billion in November, down 2.5% on the year. Varig maintains its leadership in this market, accounting for 75% of all kilometers traveled. However, by increasing international flights, TAM raised its share by 5.8 percentage points to 21.9% in the year until November.

Venezuela Tax Agency Shuts Offices Of Local Airline
7 December 2005

CARACAS (Dow Jones)--Venezuela's tax unit, Seniat, shut down the administrative offices of local airline Aeropostal (ARO) for violating tax rules, the agency announced Wednesday.

The 48-hour closure began Tuesday and applies to the company's offices in various states, said Wilmer Silva, a spokesman for Seniat.

Silva said the sanction includes a small fine and noted the closure won't disrupt air service.

Seniat officials ordered the closure after detecting the company had bookkeeping irregularities related to the value added tax, the spokesman added.

Aeropostal officials could not be immediately reached for comment.

Aeropostal has 20 office across the country and flies local and foreign flight routes.

Seniat has followed a strict "zero evasion" tax campaign for two years that includes company shutdowns and fines for those who violate tax rules.

The tax authority has managed record collections this year helped by its aggressive collection tactics and a robust economic recovery.

MIAMI--(BUSINESS WIRE)--Dec. 7, 2005--Beginning March 2006, LAN Airlines (NYSE:LFL - News) passengers will have the opportunity to enjoy the new "Premium Business" service, a blending of the best of LAN Airlines' current first and business class service.
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With the launching of the new premium business on long-haul flights between North and South America, LAN Airlines will offer a level of service offered by few airlines in the world. The new concept is based on what long-haul business passengers value most on long-haul flights: the ability to rest.

Over the next two years, all Boeing 767-300 aircraft in the fleet will incorporate the new premium business seats, featuring a full-flat 180-degree recline, which is only available from five companies in the world, offering greater comfort for sleeping in a completely full-flat horizontal position. Down comforters and soft pillows will create a true bed experience, and dividing panels between seats will offer maximum privacy during the flight.

In addition, the distance between seats will be increased to 74 inches, a considerable 32 percent increase in space for passengers compared to LAN Airlines' current business class and a significant increase to that offered by other airlines in the world, providing maximum comfort for resting. The new service, specially designed to increase the rest time available on overnight flights, offers peace and tranquility in the cabin.

This initiative represents an investment in service of more than US$100 million.

"At a time when the airline industry is facing difficult times as a result of the high price of fuel, LAN continues to believe in the future and reaffirms its commitment to the service and excellence that the company offers its clients worldwide," says Ignacio Cueto, Chief Executive Officer of LAN Airlines' passenger division. "This new LAN project revolutionizes the concept of air travel and allows us to offer a product that only a select group of airlines in the world offer their passengers."

The inflight entertainment will also reach a superior level with larger 15.4-inch individual video monitors that offer better resolution and an updated audio-visual content with an audio and video on demand system that allows passengers to choose from eight films and 20 short programs with the ability to fast-forward, rewind or pause selected films.

In addition, there will be 14 interactive video games and a true musical library with 100 CDs to choose from and enjoy with quality digital sound from the latest generation in advanced noise-canceling headsets that notably reduce the external noises of the cabin, producing a pleasant sensation of privacy.

The aircraft interior will also be modified, offering a larger space and improved lighting. Other elements of the new service, including such items as dishes, glasses and serving trays among others, have been redesigned with the new modern and elegant style consistent with the new premium business service.

This transformation of the Boeing 767-300 fleet also includes improvements in economy class with the objective of making a more pleasant travel experience. It includes larger individual video monitors with enhanced resolution in each seatback in which passengers will be able to directly choose from various audio and video on demand programming options using an easy touch screen menu.

In addition, the economy class improvements include increased space for personal carry-on items at each seat, as well as new dishes, carpeting and other items such as pillows and blankets. "We want to take care of our passengers with a smile and attentiveness in a warm and comfortable atmosphere, always with the same level of excellence that distinguishes us," adds Ignacio Cueto.

Cabin Specifications

I. New Premium Business

Seats:

Sleeper seat with 180-degree full-flat recline
Distance between seats increased to 74 inches
Dividing panels between seats for maximum privacy
Four pre-programmed seating positions
Arm rests that lower when changing seat position to horizontal bed, giving a five-inch greater width
Down comforters and soft pillows
New spaces for personal carry-on items
Entertainment:

Larger individual video monitors - 15.4 inches - with high resolution, offering audio and video on demand
Updated content with eight movies, 20 short programs, 14 video games and 100 music CDs
Noise canceling headsets that reduce the external noises of the cabin, producing a pleasant private experience.
Retractable remote control
Service:

Sequence of service redesigned especially to provide maximum hours of sleep on overnight flights: silence and tranquility in the cabin
Glass wear: new wine glasses to enjoy the best wines of the region
New champagne glasses
Dishes: a new classic-style design with contemporary influences
New fabrics inspired by natural lines that are simple and elegant
II. Innovations in Economy Class

Entertainment:

Individual video monitors in each seatback featuring a larger size of 8.9 inches and optimal resolution with touch-screen programming providing an easy and comfortable way to select options, offering audio and video on demand
A retractable remote control for operating the audio and video system
Updated entertainment content, including a selection of eight movies, 20 short programs, 14 video games and 100 music CDs
Seats:

Increased recline and cushion that slides forward one inch for greater comfort
Increased space for carry-on items, as well as cup holders
Adjustable headrests offering greater comfort
New fabrics, carpeting and redesigned pillows and blankets
The LAN service alliance participating airlines, LAN Airlines (NYSE:LFL - News), LAN Peru, LAN Argentina and LAN Ecuador, offer a united spirit of reliability and charm that provides passengers the highest level of service and safety with the complete travel experience throughout the skies of the Americas.

The LAN service alliance's vast route network reaches a large number of destinations throughout the world, including the Americas, Europe, Asia and the South Pacific. The alliance offers non-stop and direct flights from North America to Argentina, Chile, Colombia, Dominican Republic, Ecuador, Peru and Venezuela with service from 29 North American cities, including daily flights from its Miami, New York and Los Angeles gateways. Passengers traveling with any of the LAN service alliance participating airlines may accumulate frequent flier kilometers/miles in LANPASS or American Airlines' AAdvantage. Additionally, passengers traveling with LAN Airlines or LAN Peru may also accumulate frequent flier miles in any of the oneworld(TM) member frequent flier programs.

Argentina Southern Winds Airline Workers Go On Strike
9 December 2005

BUENOS AIRES (Dow Jones)--Workers at troubled private carrier Southern Winds walked off the job Friday to protest a delayed salary payment for November, causing minor delays at the Aeroparque Jorge Newbery regional airport.

The strike comes after pilots and mechanics at flagship carrier Aerolineas Argentinas (AR.YY) staged an eight-day demonstration to demand a pay raise. The Aerolineas strike ended last week.

Southern Winds' operations have been very limited since it filed for bankruptcy in March, hamstrung by a drug-trafficking scandal and the expiration of a government fuel subsidy. Local media reports published Friday said the airline had just one flight scheduled for the morning - a trip to the southern mountain resort town of Bariloche.

However, workers also threatened to cut off the main road leading to the airport, a measure that would generate delays for other carriers. During the Aerolineas Argentinas strike, employees had blockaded the highway connected to Ezeiza international airport, creating massive gridlock and forcing passengers to walk the equivalent of several city blocks to their terminals.

Brazil's Docas Faces Uphill Battle To Turn Round Varig
By Alastair Stewart
13 December 2005

SAO PAULO (Dow Jones)--Brazil's Docas Investimentos faces an uphill struggle to put ailing flagship airline Viacao Aerea Riograndense, or Varig, (VAGV4.BR) back on its feet, analysts warned Tuesday.

The investment firm, owned by local entrepreneur Nelson Tanure, on Sunday evening stepped into the breach to take over the administration of Varig in a deal worth $112 million. But the real challenge will be to restructure a company that is weighed down by approximately 7.7 billion Brazilian reals ($3.4 billion) of debt and has been slowly disintegrating over the last year.

"Something radical needs to be done, otherwise the company will continue in a downward spiral of debt and lost market share," said Pedro Galdi, an analyst at ABN Amro bank in Brazil.

But it is very unlikely that Tanure will make the major cash injections that most analysts believe are necessary, and it appears the government is unwilling to help him out by discussing their massive mutual debts, analysts said.

"Without the government negotiating their debt with Varig as part of the deal, there is little chance of a meaningful resolution," said Elaine de la Rocque, of Rio de Janeiro-based brokerage BES Securities.

The government owes Varig approximately BRL3 billion in tax credits, but it is also a major creditor, with Varig owing the government more than BRL4 billion.

On Tuesday morning, Brazil's Vice President Jose Alencar said the government would not interfere in the Varig restructuring process - which has been interpreted as implying that the government won't offer concessions on the debt.

Varig has until January 8 to submit a restructuring plan to a Brazilian court to save the company, which in June filed for protection from creditors under Brazil's new bankruptcy law.

Docas will present its plan at a meeting of Varig creditors on Dec. 19, Paulo Marinho, Docas' financial director, told journalists Monday evening.

According to the deal struck by Docas, it will pay $100 million to buy a 25% stake in Fundacao Rubem Berta, Varig's controlling shareholder. Docas will pay a further $12 million to rent another 42% stake in FRB for a period of 10 years. FRB, which has a majority 87% stake in Varig, was managed on behalf of Varig's employees.

Tanure will make an initial payment of $11.2 million, with the remaining cash to be paid over 10 years.

Separately, Docas has also agreed to pay $139 million to buy Varig's profitable cargo and maintenance subsidiaries. This will substitute an existing deal with TAP Air Portugal (TAP.YY), which agreed to pay $62 million for the units in September.

To reverse the TAP sale, Tanure and Varig need the OK of Brazil's National Development Bank, or BNDES, which had financed part of TAP's acquisition. However, Tanure himself is unlikely to get any new financing from BNDES, because of his own outstanding debts with the bank, local newspaper Estado de Sao Paulo reported Tuesday.

The deal would appear to frustrate TAP's bid to seize control of Varig. The purchase of Varig's subsidiaries was part of a bailout proposal that included an offer to invest $500 million in the restructuring of Varig.

Varig has registered its bankruptcy process with New York's Southern District Court, seeking protection from overseas creditors, including aircraft leasing firms and suppliers. The New York court is scheduled to re-examine the case on December 21.

Tanure has a long history of investing in problem companies, and the strategy of renting control of the company is typical of his approach. He bought ailing Rio de Janeiro-based newspaper Jornal do Brasil in 2000 and the struggling business daily Gazeta Mercantil in 2003, but results have been mixed.

"There remain question marks over Tanure's record with no major turn-around in the other companies he has sought to bail out," said BES Securities' Rocque.

Varig was Brazil's leading airline for years, and remains the dominant international carrier, but its position in the domestic market has been in gradual decline. In September, low-cost rival Gol Linhas Aereas AS (GOL) overtook it in the Brazilian domestic market, pushing Varig into lowly third place. The number one domestic carrier is TAM SA (TAMM4.BR).

Varig shares rose on Tuesday morning following the announcement. At 1415GMT, the company's preferred shares was 9.3% higher at BRL1.65.

Good news for Varig. May this airline get out of this financial trouble as soon as possible.

Aerolineas Argentinas Pushing Govt To OK Higher Fares
14 December 2005

BUENOS AIRES (Dow Jones)--Flagship carrier Aerolineas Argentinas (AR.YY) is asking the government to authorize an increase in fares, citing climbing costs for fuel and salaries.

Gerardo Diaz Ferran, the head of Spanish travel company Marsans, which owns the airline, was widely quoted in local media reports Wednesday as saying he raised the possibility of a fare hike in a meeting with Argentine Cabinet Chief Alberto Fernandez. The two officials met in Madrid, where Fernandez and Economy Minister Felisa Miceli are conducting a two-day series of meetings with government representatives and executives of Spanish companies with significant interests in Argentina.

"Fares haven't moved in four years and costs have risen significantly, not only for wage increases, but also because of the price of oil," Diaz Ferrin was quoted as saying. "When costs go up, there's no other remedy for increased income other than through fares. It's an issue that has to be discussed with the government."

Diaz Ferrin acknowledged that the topic was "touched tangentially" in his sit-down with Fernandez, but that the company will push for further negotiations.

The Argentine government sets minimum and maximum fares for the local airline industry. In September 2002, as the country was mired in economic crisis, the administration declared a state of emergency for the sector and revised its fare bands.

Several weeks ago, Aerolineas Argentinas negotiated a truce to a bitter labor dispute with its pilots and mechanics unions, which had gone on strike for eight days to demand higher salaries. The company agreed to a one-off payment for the workers, but the employees want that amount to be incorporated into their base wage. Aerolineas Argentinas officials say they can't afford to meet the workers' salary demands. Negotiations are ongoing and the unions say they could walk off the job again in three months if they're unhappy with the company's proposal.

Fernandez and Miceli are also holding key meetings with Telefonica (TEF) executives while visiting Spain. The telecommunications company, like other utilities with Argentine operations, is also trying to reach an agreement with the government over increases in regulated fixed-line rates. In 2002, the previous administration converted all utility rates from dollars to devalued pesos and froze them. Authorities now have to re-negotiate some five-dozen public service contracts.

Brazil Court Suspends Docas, Varig Airline Deal
14 December 2005

SAO PAULO (Dow Jones)--A Brazilian court Wednesday evening suspended the sale of control in embattled Brazilian airline Viacao Aerea Rio-Grandense, or Varig, (VAGV4.BR) by Docas Investimentos (DOCA4.BR), pending approval of creditors.

Judges at a Rio de Janeiro court ruled that the deal through which Docas bought the right to administer the flagship airline over 10 years for $112 million, announced Monday, needed to be agreed upon at a meeting of creditors on Dec. 19, upholding a case brought by the Rio de Janeiro prosecutor's office.

The ailing airline was granted bankruptcy protection in July under the weight of debts totaling approximately 7.7 billion Brazilian reals ($3.4 billion).

The Brazilian court that suspended the deal has given Varig until Jan. 8 to form a restructuring plan, while the company has also registered its bankruptcy process with New York's Southern District Court, seeking protection from overseas creditors. The New York court is scheduled to re-examine the case on Dec. 21.

Under the terms of Monday's deal, Docas, owned by businessman Nelson Tanure, would buy a 25% stake in FRB-Par, the holding company that controls Varig, and rent a further 42% stake in FRB-Par for 10 years in order to administer the company.

Varig controllers rejected an offer of $500 million from U.S. investment fund Matlin Peterson in favor of the Docas offer, according to a report in the local business daily Valor Economico.

Varig has for years been the leading Brazilian airline. It remains the dominant international carrier but increased competition from low-cost rival Gol Linhas Aereas AS (GOL) helped it drop to third place in the Brazilian domestic market in September.

LatAm Airlines To Fly More People In 06; Challenges Remain
14 December 2005

MIAMI (Dow Jones)--Latin American and Caribbean airlines will fly 5.5% more passengers in 2006 than in 2005, the president of the council of the International Civil Aviation Organization, or ICAO, said Wednesday.

Assad Kotaite of ICAO forecast a similar increase in 2007. The region transported nearly 100 million passengers in 2004, and this year passenger flow is likely to grow 6.2%, he added.

"This compares very favorably to the annual average growth of 3.4% between 1994 and 2004," said Kotaite, who was speaking at the Latin American Airline Association, or Aital after its name in Spanish, conference in Miami.

But growth is not without its pitfalls, Kotaite and other speakers cautioned.

"There will be growth, however we are concerned whether that will be a profitless growth," said Aital Executive Director Alex de Guten.

The industry in the region is still "very fragmented," and the economies of scale are just not there. It is still harder for many Latin American carriers to access the capital markets to fund their needs, and fuel "is an area of major concern," de Guten added.

"Fuel costs, as you know, have gotten out of hand," he said.

The industry also faces problems with excessive taxation by the region's governments, de Guten said.

Latin American governments still see the airline sector as a luxury industry, and not an important partner in the development of commerce and tourism, he said.

Juan Emilio Posada, Aital's president, said inter-regional traffic flows in Latin America should grow as well, perhaps by 25% in the next year. Latin America, largely because of improvements in the economies of the countries in the region, is the higher growth sector in the world according to International Air Transport Association numbers, Posada said.

Latin America, however, is still home to some of the most expensive airports to fly from or to, Posada said. Airport operators have increased fuel surcharges and imposed higher fees across the board, he said.

Carrier TAM Decides Between Embraer, Airbus Early 06-CEO
15 December 2005

MIAMI (Dow Jones) - Brazil's top airline, TAM Linhas Aereas SA (TAMM4.BR), will make a decision on which aircraft manufacturer to buy new planes from in the first quarter of next year, Chief Executive Officer Marco Antonio Bologna told Dow Jones Newswires Thursday.

TAM officials had said a decision would be reached by late 2005. The carrier, which enjoys a 43% market share in Brazil, is in talks with Brazil-based Empresa Brasileira de Aeronautica (ERJ), or Embraer, and France-based Airbus (ABI.YY), seeking to replace its 25 Fokker 100, which can carry 90 to 120 passengers.

Bologna spoke on the sidelines of a Latin American airline conference here. He was mum on TAM's specific plans for 2006, limiting himself to say the company is going to focus on consolidation rather than seeking expansion in the new year.

"The goal is to keep what we have," he said, declining to give guidance on what's the market share goal for 2006. TAM grew 10 basis points in the past 20 months alone, Bologna noted, and it would be unrealistic to expect the same level of growth going forward.

Rather, the company will invest in customer loyalty: The customers will keep coming back because the company will continue to offer more direct flights to more places at competitive prices, he said. Bologna also declined to discuss capital expenditure goals for next year, saying only the company will mainly invest in its maintenance programs, system technologies and training. Bologna said TAM is mulling over a new Montevideo-Sao Paulo route in the near future, besides the already announced routes Lima-Sao Paulo and Manaus-Caracas, scheduled to take off in January of 2006.

The carrier is also "wooing" London, Bologna said, a market served by competitors Viacao Aerea Rio Grandense, or Varig, and British Airways.

"We are asking (British) authorities for seven flights by the end of 2006," he said. TAM's main competitors in Brazil are no-frills Gol Linhas Aereas Inteligentes (GOL) and embattled Brazilian legacy carrier Varig. But TAM climbed to the top spot in Brazil growing organically and by focusing on customer service, Bologna said.

It isn't counting on a complete breakdown of Varig, which many in the industry believe it might be just a matter of time, to win over that many more customers, he said. Budget carrier Gol may be another story, he conceded.

"Gol is the company that makes us get up earlier in the morning," quipped Bologna. "It is a healthy competitive environment."

Analysts have said TAM will continue to have an edge against Gol in attracting business travelers, which make up for the vast majority of passengers in Brazil, because it offers more flights and fewer stopovers than Gol. In the regulatory scene, Bologna was enthusiastic about the planned Agencia Nacional de Aviacao Civil, or Anac, which is scheduled to take over many of the duties of the Department of Civil Aviation, or DAC, an arm of the Brazilian Air Force. The change from a military organism to a political agency was an old request of the Brazilian airline industry.

On Thursday, future Anac directors were been questioned by the Brazilian Congress, and the agency is expected to be up and running next year. The sector is going to lobby mainly on improvements in airport infrastructure and for a lesser tax burden for commercial aviation, Bologna said.

Bologna was also optimistic about prospects for the Brazilian economy in 2006.

"It should be an even better year," he said. Foreign exchange rates should continue to be stable, and oil prices are likely to continue to hover around $55 to $60 a barrel, he said.

"This is a growth environment," Bologna said. The strides made in the economic situation will bring more Brazilians to the skies, but not at the same pace of this year, when the domestic market grew 19%, Bologna said. He expects overall growth of 8% to 10%, he added. Recent years were times of unprecedented growth for Brazilian aviation, Bologna said, adding that in 2004 the domestic market grew 12%.

Brazil Varig Air Petitions To End Bankruptcy Proceedings
15 December 2005

SAO PAULO (Dow Jones) -- Financially troubled Brazilian airline Varig SA (BAGV4.BR) filed a petition on Thursday seeking an abrupt end to bankruptcy proceedings it initiated in July.

"The petition has been filed with the local bankruptcy court (in Rio de Janeiro)," said a Varig spokesman. "Everything now depends on the judge."

The spokesman said the court has offered no timetable for a ruling on the petition. The airline didn't give a reason for its petition, which it didn't publish.

Varig sought protection from creditors through a bankruptcy procedure it began in July.

Under terms set by the bankruptcy court, Varig has until Jan. 8 to present a restructuring plan.

The airline has encountered difficulties in filing such a plan, however, since virtually any plan would depend on attracting strategic partners.

Earlier this month, Rio de Janeiro investor Nelson Tanure presented an investment proposal that would have pumped $112 million into Varig. However, on Wednesday a panel of Rio de Janeiro judges ruled the proposal out of order for various procedural reasons. Other proposals from outside investors have been vetoed by Varig's creditors.

By withdrawing from the bankruptcy procedure, Varig would be free to seek partners without interference from the courts or creditors, but it would also be open to suits from creditors that could eventually lead to its liquidation.

The ailing airline was granted bankruptcy protection in July under the weight of debts totaling approximately 7.7 billion Brazilian reals ($3.4 billion).

For years, Varig has been the leading Brazilian airline. It remains the dominant international carrier but increased competition from low-cost rival Gol Linhas Aereas AS (GOL) meant it lost second place in Brazil's domestic market in September.

Venezuelan plane in emergency landing, no injuries

CARACAS, Venezuela, Dec 15 (Reuters) - A Venezuelan Conviasa airplane carrying 40 passengers made an emergency landing in Margarita Island on Thursday after part of its landing gear failed, rescue officials said.

No passengers or crew were injured and initial reports said the aircraft did not appear to be damaged, Civil Protection official Francisco Duarte told local Globovision television.

"A few people got very nervous, but no one has any serious injuries," he said.

The Dash-7 aircraft, operated by state-run airline Conviasa, left Margarita Island off the Venezuelan coast bound for Caracas airport, but returned after it reported mechanical problems. The plane dumped fuel to reduce fire risk before landing at Margarita's Santiago Marino airport.

Conviasa, which started operating last year with a De Havilland Canada Dash-7 aircraft and a Boeing 737-300, said it had plans to purchase about 10 more planes to expand its fleet and routes.

Brazil Court Returns Control Of Varig Air To Foundation
16 December 2005

SAO PAULO (Dow Jones)--A Brazilian appeals court on Friday returned control over troubled airline Varig to its traditional controler, the Rubem Berta Foundation, a spokesman for the airline said.

On Thursday night, a local civil court ordered the temporary removal of the foundation's appointees from Varig's board of directors, saying control should rest with a bankruptcy judge.

The foundation immediately appealed the order, overturning it Friday at the appeals level.

Varig sought protection from creditors through a bankruptcy procedure that began in July.

Under terms set by the bankruptcy court, Varig has until Jan. 8 to present a restructuring plan.

The airline has encountered difficulties in filing such a plan, however, since it has failed to find any strategic partners.

The ailing airline was granted bankruptcy protection under the weight of debts totaling approximately 7.7 billion Brazilian reals ($3.4 billion).

For years, Varig has been the leading Brazilian airline. It remains the dominant international carrier but increased competition from low-cost rival Gol Linhas Aereas AS (GOL) meant it lost second place in the Brazilian domestic market in September.

Creditors In Brazil's Varig Airline Reject Docas Deal
19 December 2005

SAO PAULO (Dow Jones)--Creditors in the embattled Brazilian airline Viacao Aerea Rio-Grandense, or Varig, (VAGV4.BR) rejected the sale of a controlling stake in the company's owner FRB-Par to Docas Investimentos during a meeting in Rio de Janeiro Monday, a company spokesman said.

Last week, Docas, owned by local businessman Nelson Tanure, announced he had bought 25% of FRB-Par and would rent 42% of its shares for a period of 10 years in a deal worth $112 million.

However, a court later ruled that creditors first had to approve the deal.

The creditors' decision was met with cheers from representatives of Varig workers, who feared Tanure would run the company into the ground.

FRB, or the Ruben Berta Foundation, owns 87% of Varig and mainly represents its workers.

Varig has been under bankruptcy protection since July under the weight of debts totaling approximately 7.7 billion Brazilian reals ($3.4 billion).

Under terms set by the bankruptcy court, Varig has until Jan. 8 to present a restructuring plan.

The airline has encountered difficulties in filing such a plan, however, having failed to find any strategic partners.

Meanwhile, a New York bankruptcy judge will rule Wednesday on an application by aircraft leasing companies to confiscate Varig planes on U.S. soil to ensure payment.

The creditors' meeting was due to start in the morning but only got under way at approximately 1700 GMT after a series of injunctions stopping the gathering had been lifted.

US Court OKs Brazil Airline Varig Payment Pact With Gecas
21 December 2005

NEW YORK (Dow Jones)--A New York bankruptcy court on Wednesday gave its seal of approval for Brazil's flagship airline, Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, to pay $6.46 million to GE Commercial Aviation Services LLC.

The New York court brokered the agreement between Gecas, a unit of General Electric Co (GE), and Varig, after the two sides had disagreed over how the funds in an escrow account held at JPMorgan should be paid out.

The agreement states that cash received before Varig filed for bankruptcy on June 17 should be paid to Gecas, to settle debts run up by the airline through leasing contracts with the U.S. firm. Any money paid into the escrow account should be paid to Varig, according to the agreement.

According to the court order, Varig has $14.7 million plus accrued interest in an escrow account at JPMorgan. The remaining $8.26 million plus interest, which has been received since June 17, will be paid out to Varig.

The New York court said Varig must seek ratification from the 8th Commercial Court of the City of Rio de Janeiro, which is managing the airline's bankruptcy process, on Thursday.

In previous court documents, Gecas has said that the Brazilian airline acknowledged debts of about $100 million in 2004, some of which have since been repaid. Gecas said it no longer leases any aircraft to Varig.

Earlier Wednesday, Varig said in a statement that the New York court has extended the airline's protection from creditors through Jan. 13. The airline had been threatened with seizure of aircraft on U.S. soil because of arrears in payments to aircraft leasing companies.

Varig said it is preparing a detailed recovery plan that will resolve the arrears problem.

Under terms of its Brazilian bankruptcy procedure, Varig has until Jan. 8 to present a detailed recovery plan. Varig said it will meet the Jan. 8 deadline.

Brazil Varig Airline 11-Month Loss BRL1.06B - Report
23 December 2005

RIO DE JANEIRO (Dow Jones)--Financially troubled Brazilian airline Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, posted a net loss of 1.06 billion reals ($457 million) in the first 11 months of 2005, widening sharply from a net loss of BRL348 million in the same period a year ago, the company said Friday, according to the Estado newswire.

Varig reported net revenue of BRL5.11 billion in the first 11 months of 2005, down from BRL6.15 billion in the year-ago period.

Varig needs to report financial results on a monthly basis as part of the court-managed financial restructuring process, which began on June 17. The company has approximately BRL7.7 billion in debt.

The company has seen a continued drop in its market share resulting in the loss of the No. 2 position in the domestic market to Gol Linhas Aereas SA (GOL).

Brazil Airline Varig Ends Flights Between Brazil, Japan
28 December 2005

SAO PAULO (Dow Jones)--Brazil's embattled flagship airline Viacao Aerea Rio-Grandense, or Varig, (VAGV4.BR) will stop flying between Sao Paulo and Tokyo in order to cut costs, a company spokesman confirmed Wednesday.

The last flight will take off on Jan. 14, ending 37 years of operations in Japan. Offices across Asia will also be closed as the company seeks to appease creditors.

Varig sought bankruptcy protection in June under the weight of debts that total approximately 7.7 billion Brazilian reals ($3.3 billion).

The company has until Jan. 8 to present a recovery plan to Brazilian judges.

The route was once profitable as it connected Brazil's large Japanese immigrant population with the old homeland, but that changed with the dip in international air traffic following the terrorist attacks on New York City on Sept. 11, 2001, according to a report in the local Valor Economico business daily.

For years Varig has been the leading Brazilian airline. It remains the country's dominant international carrier, but increased competition from low-cost rival Gol Linhas Aereas AS (GOL) pushed it to third place in the Brazilian domestic market in September.

Brazil Gol Airline To Begin Flights To Paraguay Jan 4
28 December 2005

SAO PAULO (Dow Jones)--In one more step in its expansion across South America, Brazilian no-frills airline Gol Linhas Aereas Inteligentes SA (GOL) announced Wednesday that it will begin flights to Asuncion, Paraguay on Jan. 4.

The company said it will initially offer one flight per week, departing from Sao Paulo.

Paraguay is the fifth most frequented destination by Brazilians flying to neighboring countries. In 2003, approximately 144,000 passengers traveled between Brazil and Paraguay, Gol said.

Last week, Gol said it started selling tickets from Brazil to the Uruguayan capital of Montevideo and also to two more Argentine cities, Cordoba and Rosario. Gol already offers flights to Argentina's capital of Buenos Aires.

Gol became the country's first low-cost airline in 2001 and since then has registered breakneck growth. In November, Gol had 29.1% of domestic market share in Brazil, up from 23.9% in November 2004. Currently, Gol is the second largest domestic airline in market share.

TAM SA (TAMM4.BR) is Brazil's largest local carrier, while financially troubled Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, came in third place.

Tanure Withdraws Bid For Brazil Airline Varig
5 January 2006

SAO PAULO (Dow Jones)--Nelson Tanure, owner of Docas Investimentos, withdrew his proposal to buy control of Brazil's embattled flagship airline Viacao Aerea Rio-Grandense, or Varig, (VAGV4.BR) in the face of opposition to the bid from creditors, shareholders and company workers, the local Estado newswire reported Thursday.

However, Tanure said he would maintain his bid of $139 million for the profitable logistics and maintenance wings of Varig, said Docas Spokesman Demetrius Guiot.

Brazil's Varig filed for bankruptcy at a Brazilian court in June under the weight of a debt load of approximately 7.7 billion Brazilian reals ($3.4 billion).

The court gave Varig until Jan. 8 to agree terms with a new partner and submit a recovery plan.

In December, Tanure had offered $112 million for control of Varig's controller, Fundacao Rubem Berta. The deal involved the purchase of a 25% stake in Rubem Berta and a loan of a 42% stake over 10 years.

Speaking at a meeting of Varig workers' representatives in Rio, Tanure blamed negative press about his intentions for Varig for his decision to pull out.

Following the proposal, many observers had warned that Tanure would attempt to take control of the company without assuming the debts, leading to a series of court actions seeking to block the deal.

In November, Varig closed a deal to sell the cargo and maintenance subsidies to a consortium led by Portuguese airline TAP (TAP.YY) for $62 million in order to avoid the repossession of a number of its jets in the U.S..

However, there was a clause in the deal that allows other companies to take the subsidiaries should they make higher bids.

According to Varig officials, U.S. investment fund Matlin Patterson made a bid for $77 million, along with the Tanure offer.

For years, Varig has been the leading Brazilian airline. It remains the dominant international carrier but increased competition from low-cost rival Gol Linhas Aereas SA (GOL) meant it fell to third place in the Brazilian domestic market in September.

Brazil Airlines Dec Passenger Miles Rise 25.3% On Yr
5 January 2006

SAO PAULO (Dow Jones)--Paying passengers on Brazilian domestic flights flew a total of 3.24 billion kilometers in December, up 25.3% in the same month a year earlier, according to monthly figures published by Brazil's Civil Aviation Department, or DAC, Thursday.

The increase in traffic was due to more flights being run by Brazil's largest local carrier, TAM SA (TAMM4.BR), and no-frills operator Gol Linhas Aereas (GOL).

The growth occurred amid an increase in the average number of seats filled to 73% from 71% in 2004. The number of passenger kilometers rose from 2.87 billion in November.

TAM remained the market leader, accounting for 46.1% of all domestic passenger kilometers flown, up from 43.8% in November and up from 41.2% a year earlier.

Meanwhile, Gol increased its advantage over Viacao Aerea Riograndense SA (VAGV4.BR), or Varig. Gol had 29.1% of the market last month compared with 29.1% registered in November and 24.2% registered in December 2004. Varig slipped to 21.7% compared with 31.6% a year earlier.

Gol and TAM both took advantage of a 13.9% decline in Varig's passenger kilometers to 710,470. Varig continues to struggle under the burden of crippling debts. The company sought bankruptcy protection in June.

In 2005, paying passengers flew a total of 33.70 billion kilometers, up 19.4% from 2004. Over the year, TAM registered a 43.5% market share, Gol had a 27.3% market share and Varig had a 26.7% slice.

The number of kilometers flown by paying passengers on international flights run by Brazilian companies dropped to 2.025 billion in December, down 2.5% on the year. Varig maintains its leadership in this market, accounting for 75% of all kilometers traveled.

Peru suspends operations of its national airline
7 January 2006

LIMA, Peru (AP) - Peruvian authorities have suspended operations of the state-owned airline, TANS Peru, after "a series of serious events that have put safety in danger," an official said Saturday.

Roberto Rodriguez, director of the country's civil aviation office, told Radioprogramas radio that his agency on Monday would begin an investigation of the airline's operations to determine if it should be allowed to fly again.

On Aug. 23 a TANS flight crashed in the jungle city of Pucallpa, 490 kilometers (305 miles) northeast of the capital of Lima, killing 40 people and injuring 57.

That was followed by an incident "a month and a half ago when a TANS plane had an emergency in Cuzco. It lost a turbine (engine)."

He said another plane lost one of its two engines near the Andean tourist destination of Cuzco on Friday.

"Two emergencies in a month and a half justify the decision" to ground the airline, he said.

TANS has not issued a statement.

In January 2003, a TANS twin engine Fokker 28 turbojet plowed into a mountain in Peru's northern jungle, killing all 42 passengers and four crew members.

TANS flies to nine Peruvian cities from Lima, including the major jungle city of Iquitos and the southern Andean city of Juliaca, near the famed Lake Titicaca.

no one has posted any information about the a-380 going to jmc(medellin) for tests tomorrow, and later going to bolivia yet?

Brazil's Varig Resumes Payments, But Outlook Still Cloudy
By Alastair Stewart
9 January 2006

SAO PAULO (Dow Jones)--As a court-ordered six-month moratorium on debt payments ended Monday for Brazil's embattled flagship airline, Viacao Aerea Rio-Grandense, or Varig, (VAGV4.BR), the future of the company remained extremely unclear.

Six months ago, a Rio de Janeiro bankruptcy court afforded Varig the breathing space to set up a restructuring plan to relieve the company's debts, which are estimated at over 7 billion Brazilian reals ($3.1 billion), and to stem its day-to-day operational losses.

But there remains no clear operational strategy to turn the company around as it now faces resumed debt servicing, analysts said.

"Without any clear signal from the Finance Ministry, the major creditor and potential debtor, no meaningful deal is possible," said Marcelo Ribeiro, aviation analyst at the local Pentagono brokerage.

Varig owes approximately BRL3 billion in taxes. On the other hand, the company has won a series of court decisions in support of claims against the government of around BRL4 billion. But the administration of President Luiz Inacio Lula da Silva has given no indication that it will bail out Varig.

"This being the case, Varig's administration will try to extend the restructuring process to next year, when there may be a new government, which can help," said Ribeiro. Brazilians go to the polls in October to elect members of congress, state governors and a president and vice president.

Varig President Marcelo Bottini declared last week Varig gained little from the court protection as it lacked cash to make any meaningful changes in operations. As a result, wages continued to be paid behind schedule and suppliers have reduced the payment periods from over a month to immediately upon delivery.

However, practically speaking, Varig had had little choice but to seek court protection, as the company was losing $1 million a day and faced having its airplanes seized in the U.S., Omar Carneiro da Cunha, former Varig president told the local daily Estado de Sao Paulo in an interview published Monday.

On Dec. 19, Varig's major creditors accepted a plan to convert the carrier's debt into shares of a new company. All creditors, including government agencies, suppliers and the company's pension fund, have accepted a 36-month moratorium on payments. Labor unions, however, will be paid over a period of twelve months.

The company also plans to increase the number of operating aircraft to 63 in the first half of 2006 and 75 by the end of 2007.

With losses of BRL1 billion in the first eleven months and cash flow falling, the company is in need of outside investors, said Bottini.

At present, investment proposals focus on the profitable logistics and maintenance subsidiaries rather than an overall restructuring.

In November, Varig closed a deal to sell the cargo and maintenance units to a consortium led by Portuguese airline TAP (TAP.YY) for $62 million to avoid the repossession of a number of its jets in the U.S.

However, the deal included a clause that allows Varig to sell to a higher bidder at a later date, although a fine must be paid to TAP. That looked like a possibility last week, but a bid by U.S. investment fund Matlin Patterson to buy the logistics wing for $55 million was withdrawn because of delays, while a bid of $139 million by local investment fund Docas Investimentos for the logistics and the maintenance subsidiaries was rejected by Varig since it was unclear where the funds would come from, said the local business daily Valor Economico on Monday.

The deal would have allowed the company to pay debts with aircraft leasing companies but it still wouldn't have resolved the immediate problems, said Pentagono's Ribeiro.

Meanwhile, the company continues to steadily lose market share in a year of fantastic growth for the industry as a whole. The industry's total number of kilometers traveled by passengers on domestic flights rose 25% in December compared with the year before, but Varig passenger kilometers fell 14% year-on-year to 705 million.

The principal factor in the fall was the end of the code sharing deal with rival airline TAM SA (TAMM4.BR).

"The end of that deal was like a knife in the heart of Varig," said Pantagono's Ribeiro.

Under Brazil's new bankruptcy law, the Rio de Janeiro bankruptcy court will oversee the restructuring over the next 24 months. However, on Friday, a New York bankruptcy court is due to review a case filed by airplane leasing companies to recover a loan of $56 million. Varig's Bottini said last week that it will make the payment before the end of the week.

For years, Varig has been the leading Brazilian airline. It remains the dominant international carrier but increased competition from low-cost rival Gol Linhas Aereas AS (GOL) meant it lost second place in the Brazilian domestic market in September.

no one has posted any information about the a-380 going to jmc(medellin) for tests tomorrow, and later going to bolivia yet?
Airbus testa maior avião do mundo na Colômbia e na Bolívia
6 January 2006
O Globo Tempo Real

MEDELLIN, Colômbia - O consórcio europeu Airbus fará testes de rendimento dos motores do A380, o maior avião comercial do mundo, em aeroportos de grande altitude na Colômbia e na Bolívia, informaram nesta sexta-feira autoridades aeronáuticas da Colômbia.

O superjumbo A380, que desde janeiro de 2005 está em fase de testes antes de sua comercialização, deve aterrissar neste domingo no aeroporto José Maria Córdova, no Rio Negro, nas proximidades de Medellin, capital do estado de Antioquia. O terminal, que fica a mais de 2,1 metros de altitude, e o aeroporto de La Paz, na Bolívia, a 3,6 mil metros do nível do mar, serão os dois destinos de provas do avião na América Latina, onde a tripulação fará exames técnicos e de segurança para testar o funcionamento dos motores em cidades situadas a grandes altitudes.

O A380 fará testes na Colômbia durante aproximadamente quatro dias, afirmou Luis Carlos Guerra, diretor regional da Aeronáutica Civil, entidade governamental aeroportuária do país.

O consórcio Airbus, que integra entidades da Alemanha, Espanha, França e Grã-Bretanha, apresentou o A380 em 2005 na sede da Airbus em Toulouse (França). O avião tem capacidade para transportar entre 500 e 800 passageiros em dois andares de cabines, de acordo com diversas configurações, e possui autonomia para 15 horas de vôos.

Brazil's Varig Wins Bankruptcy Extension
12 January 2006

SAO PAULO, Brazil (AP) - Brazil's struggling airline Viacao Aerea Rio-Grandense SA, or Varig, said Thursday it paid $56 million to U.S. aircraft leasing companies and won an extension of its bankruptcy protection.

A New York court extended protection to Varig until March 17, when Judge Robert Drain will assess the progress of the company's restructuring plan, Varig said in a statement.

The company will present the plan to creditors on Jan. 31, Varig said.

Burdened with debts of more than 7 billion reals ($3.1 billion), Varig sought local bankruptcy court protection in June. But leasing companies filed separate cases in New York.

Varig raised money by selling its cargo unit VarigLog to the U.S.-based fund Matlin Patterson. On Thursday, the airline announced the sale of its maintenance subsidiary VEM to the Portuguese airline TAP for $72.2 million.

Varig remains the dominant Brazilian carrier on the international market but has fallen behind TAM Linhas Aereas SA and the no-frills airline Gol Linhas Aereas Inteligentes SA on the domestic market.

Brazil's Gol Says It's Breaking Even On New Routes
26 January 2006

SAO PAULO (Dow Jones)--Brazil's no-frills airline Gol Linhas Aereas (GOL) has already reached the break-even point on its new routes in South America, company President Constantino de Oliveira Junior told a conference call with investors Thursday.

"We have been seeing some very positive news in this area," he said.

He said the company, which has been flying for only five years, is looking to increase its share of the Brazilian international air market from its current level of 5.8% to 8.2% by 2007.

The company currently flies between Brazil and Argentina, Bolivia, Paraguay and Uruguay.

Local Gol shares rallied sharply following the news. At 1720 GMT, the local preferred stocks stood up 9.37% at 66.39 Brazilian reals ($29.64).

Gol is currently the No. 2 airline on the domestic market.

Aerolineas Argentinas adds 7 planes in growth plan

BUENOS AIRES, Argentina, Jan 30 (Reuters) - Argentina's leading airline, Aerolineas Argentinas, will add seven new planes to its fleet expansion plan, bringing the total 2004-2009 investment to $529 million, the company said on Monday.

The carrier had originally planned to add 15 Boeing 737/500 aircraft to its fleet, but has now increased the number to 20, of which 10 will be in service by the end of February, it said in a statement.

The Boeing jets will be leased with an option to buy and will fly on regional and domestic routes.

The company will also bring in two Airbus 310/300 aircraft to cover regional routes and flights from Buenos Aires to Miami and Mexico City.

The company, controlled by Spanish investment group Interinvest, is also studying the addition of a Boeing 747/400 for international routes, which would give it a total of four aircraft of this model.

Aerolineas Argentinas says its controls 90 percent of the Argentine market.

Various theories in Venezuela plane crash that killed 160, investigation head says
By IAN JAMES
31 January 2006

CARACAS, Venezuela (AP) - Investigators are weighing several theories, from icy conditions to pilot error, as they struggle to determine why a plane crashed in Venezuela last August killing all 160 people on board, an official leading the investigation said Tuesday.

The chartered West Caribbean Airways jet crashed in western Venezuela on Aug. 16, killing 152 tourists from the French Caribbean island of Martinique and eight Colombian crew members.

The pilot radioed authorities saying "flame out" in both engines as the McDonnell Douglas MD-82 jet plummeted to the ground. But Venezuelan officials have since said they don't believe the engines actually failed, raising doubts about what caused the jet to plunge.

"We have various hypotheses," investigation board chief Lt. Col. Lorllys Ramos Acevedo said in a phone interview, declining to give specifics.

"There are many factors we have to study to arrive at a definitive conclusion," she added, saying investigators were looking at "the human factor," the way the aircraft functioned and the weather conditions.

As for whether ice formation on the plane could have been a factor, she said investigators still could not say with certainty.

Investigators could make a report on their latest findings by the end of March, but it may take more time to offer definitive conclusions, Ramos said.

"There are still many questions," she said. "We aren't going to rule out any factor."

French, Colombian and U.S. experts have been cooperating with Venezuelan investigators, and the cockpit voice recorder has been analyzed in France along with the flight data recorder.

An initial report from Venezuelan investigators issued in November said the plane began a normal ascent from 31,000 feet (9,450 meters) to 33,000 feet (10,060 meters) about 20 minutes before the crash.

It said the plane leveled off about two minutes later and accelerated, all appearing normal.

About 90 seconds later, the plane began to steadily decrease speed, and after eight minutes, the autopilot was disengaged, the report said.

Asked whether a rapid climb before that was thought to have affected the autopilot system, Ramos said no and added, "That's false."

Grant Brophy, director of flight safety and security programs at Embry-Riddle Aeronautical University in Daytona Beach, Florida, said one big question is why the plane's speed suddenly began to flag.

"Why is there no power?" he said after reviewing the initial investigative report. "You really need to know why they can't apply power or why power is not being applied in this situation."

He said one possibility -- among many -- is that crew members were getting erroneous readings from instruments. He added that has been known to occur when ice forms over the air intakes used for flight instruments.

The cockpit recording revealed the crew cited "weather conditions that included possible icing conditions" on the plane's body minutes before the crash, the investigative report said. However, Venezuelan investigators have said the jet's anti-ice system was working and had been activated.

The 152 vacationers from Martinique had chartered the flight and were headed home after a weeklong trip to Panama.

Chile LAN January passenger traffic rises 7.5 pct

SANTIAGO, Chile, Feb 10 (Reuters) - Chile's dominant carrier, LAN Airlines SA , said on Friday passenger traffic rose 7.5 percent in January compared with the same month a year earlier, mostly due to higher capacity on international flights.

LAN said in a news release that international passenger traffic for January rose 9.3 percent as capacity increased 9.0 percent. The international passenger load factor, which measures how full aircraft fly, rose 0.2 percentage points.

Domestic passenger traffic fell 2.0 percent, even though capacity increased 0.8 percent. That means the domestic passenger load factor fell 1.9 percentage points.

"Domestic load factor decreased due to schedule adjustments and increased competitive activity," LAN said.

Privately held local carrier Sky Airlines has been gaining market share of domestic flights.

LAN said traffic grew on routes to Europe and the South Pacific, as well as between Latin American markets.

Cargo traffic increased 5.0 percent in January as capacity rose almost 9 percent, which means load factors fell in that area of LAN's business.

LAN, one of the leading airlines in Latin America, has affiliates in Argentina, Ecuador and Peru and flies throughout the Americas, to Europe and the South Pacific.

Brazil airline TAM posts lower Q4 profit on costs

BRASILIA, Brazil, Feb 13 (Reuters) - Brazil's leading airline, TAM Linhas Aereas , reported on Monday a steep drop in quarterly profit as soaring fuel prices drove up operating costs, offsetting an increase in passenger traffic.

The Sao Paulo-based carrier made a net profit of 65.3 million reais ($30.1 million) in the fourth quarter, down from 83.3 million reais in the same period in 2004 and 93.3 million reais in the third quarter of 2005.

For the whole of 2005, TAM posted a net profit of 187.4 million reais, down 45 percent from earnings of 341.1 million reais in 2004.

TAM said a sharp increase in operating costs hurt its bottom line in the fourth quarter. Total costs rose 21.4 percent in the quarter from a year earlier to 1.44 billion reais, led by a 59.7 percent increase in fuel costs.

Net revenue, however, rose in the quarter as TAM carried more passengers and added new routes. Revenue totaled 1.58 billion reais last quarter, up 17.6 percent from 1.34 billion reais in the same period in 2004.

The airline carried 5.4 million paid passengers in the fourth quarter, up from 3.95 million in the year-earlier period. In 2005 the total number of paid passengers was 19.6 million, a 44.7 percent increase over 2004.

Part of that increase was due to the addition of routes. TAM, founded in 1961 as a small cargo carrier, added flights last year to Paris and Buenos Aires and also began offering service in November to New York.

Domestically, TAM finished the year in the top spot with 46.1 percent of the Brazilian aviation market, followed by the fast-growing low-cost carrier Gol Linhas Aereas Inteligentes and Varig , respectively.

TAM's average market share in 2005 was 43.5 percent, a 7.7 percentage point increase over 2004. The domestic aviation market expanded 24 percent last year, helping TAM lift its load factor, or occupancy rate, to 70.6 percent from 66 percent in 2004.

On the operating level, earnings before interest, taxes, depreciation and amortization, a measure of cash flow known as EBITDA, fell to 322 million reais in the fourth quarter from 337.3 million reais in the same period in 2004.

($1 = 2.17 reais)

Brazil's Gol airline starts service to Paraguay
14 February 2006

SAO PAULO, Brazil (AP) - Brazilian airline Gol is adding Paraguay to its list of international destinations, continuing a steady push toward boosting its presence across South America, the company said Tuesday.

Gol Linhas Aereas Inteligentes SA will begin daily service to Asuncion, Paraguay, from the Argentine capital of Buenos Aires starting Wednesday, the company said in a statement.

It will be Gol's sixth international destination. The company flies to three cities in Argentina and one each in Bolivia and Uruguay, though most of its 430 daily routes are still concentrated in Brazil.

The wildly successful low-frills Gol launched in 2001 with service to just six Brazilian cities. It has since overtaken Brazil's Viacao Aerea Riograndense SA, or Varig, to become the second-largest carrier in the country after TAM Linhas Aereas SA.

Gol also plans to start service to the Chilean capital of Santiago, and to Venezuela's Caracas. The company is making plans to participate in a joint venture to launch a Mexican airline that will serve the domestic market with an eye toward expansion to U.S. destinations.

Venezuela Bars Continental, Delta, Limits American
24 February 2006

CARACAS (AP)--Venezuela has prohibited Continental Airlines (CAL) and Delta Airlines (DAL) from flying into this South American nation and is restricting American Airlines (AMR), Francisco Plaz, the president of the National Aviation Institute, said.

Speaking late Thursday, Plaz said that the measure was taken because the U.S. Federal Aviation Administration had established a similar ban on commercial jets registered in Venezuela 10 years ago due to safety violations.

The ban would take effect on March 1, Plaz told the local Globovision television channel.

Delta Airlines currently services a daily route from Simon Bolivar international Airport to Atlanta while Continental Airlines has daily flights to Houston and weekly flights to New York. American Airlines services daily routes to Puerto Rico and Miami.

A spokeswoman for the Venezuelan Association of Airlines, who spoke on the condition of anonymity because she was not authorized to be quoted by name, told The Associated Press the three U.S.-based airlines received notification of the ban on Thursday and would meet soon with Venezuelan aviation officials to discuss the measure.

In 1996, the FAA ruled that Venezuela must tighten its airline safety procedures and downgraded its civil aviation authority to Category II, restricting flights because Venezuela allegedly didn't meet international safety standards.

Venezuelan officials say they have improved safety standards since then.

"We have exhausted all avenues with the U.S. aeronautical authority," Venezuela's National Aviation Institute said in a statement issued Thursday. "We have been forced to reduce the frequency of flights of U.S. airline companies from the U.S."

U.S. aviation authorities have "failed to give Venezuelan airlines the rights they deserve under bilateral agreements," the statement added.

Chile Lan's Net Profit Seen Down On Surge In Fuel Costs
By Patricia San Juan
27 February 2006

SANTIAGO (Dow Jones)--Rising passenger and cargo traffic at Chilean airline Lan SA (LFL) likely couldn't offset the surge in airline fuel costs last year, according to analysts' forecasts.

Net profit at the country's top air carrier dropped to $144 million in 2005, according to a median of three analyst estimates. That is down 12% on the year from $163.6 million in 2004. For the fourth quarter, the analysts estimate net profit at $41.1 million, down 14% from $47.8 million in the same quarter last year.

Still, compared with the previous three quarters, "the positive effect of the surcharge" to tickets the airline introduced will help offset some of the impact from the high price of airline fuel, said Gavin Templeton, head of research at IM Trust in Santiago.

At the same time, the increases in international passenger and cargo traffic led to a 19.5% jump in sales to $2.5 billion last year from an unadjusted $2.1 billion in 2004, and by 15.2% to $702 million in the fourth quarter from $609.5 million in the same quarter in 2004, according to the analysts' forecasts.

Stronger currencies and economies in Latin America boosted Lan's traffic, the analysts said.

The airline is one of the largest in the region, with units in Chile, Argentina, Peru, Ecuador and the Dominican Republic. It's also the largest cargo carrier in Latin America.

Lan's passenger traffic rose 15.6% on year in 2005 on the back of a 19.1% increase in international travel. Cargo traffic rose 5.9% overall in 2005.

Lan will release its fourth-quarter and full year results on March 1.

Venezuela May Ban US Flights To Protest US Restrictions
2 March 2006

CARACAS (AP)--Venezuela is prepared to go ahead with a ban on flights by most U.S. airlines unless U.S. aviation authorities agree to drop safety restrictions on this country, the vice president said Thursday.

If the U.S. Federal Aviation Administration fails to upgrade its rating of Venezuelan carriers, "U.S. airlines will not fly, it's decided," Vice President Jose Vicente Rangel said.

Venezuela is demanding that the FAA reverse a November 1995 decision to lower the country's airlines from category 1 to 2 because Venezuelan conditions did not comply with international air safety standards.

The measure requires Venezuelan carriers to fly aircraft and crew rented from U.S. companies or another category 1 country to enter U.S. airspace.

Venezuela's National Aviation Institute announced a retaliatory measure last month, prohibiting flights by most U.S. carriers starting March 1, but later delayed the ban until March 30 to allow negotiations by the airlines and U.S. authorities.

The ban will prohibit flights by Houston-based Continental Airlines (CON.XE) and Delta Air Lines (DAL), and reduce by 70% flights operated by Fort Worth, Texas-based American Airlines (AMR), the other major U.S. carrier serving Venezuela.

Delta operates daily flights between Caracas and Atlanta. Continental has daily flights between Caracas and Houston and weekly flights to New York.

American has daily flights from Venezuela to Puerto Rico and Miami and weekly flights to Dallas and New York.

American transported about 60,000 passengers during the 2005 end-of-year travel season, according to Venezuelan airline authorities.

Chile LAN says will break even in Argentina in '06

SANTIAGO, Chile, March 2 (Reuters) - Chile's LAN Airlines, a major Latin American carrier, expects its Argentine affiliate to win a domestic market share of close to 30 percent and become profitable by the end of 2006, an executive said on a conference call on Thursday.

"LAN Argentina is expected to break even in late 2006 with annual revenues of around $300 million," Chief Financial Officer Alejandro de la Fuente said in a conference call with airline analysts to discuss fourth-quarter results.

He said LAN Airlines' share of the domestic Argentine market would rise to close to 30 percent late this year compared with 12 percent now "aided by the fact that we will have international connections feeding traffic into the domestic service."

LAN on Wednesday reported $49.9 million in net profit for the fourth quarter, higher than expected as a fuel surcharge it imposed on passengers and cargo clients offset higher fuel prices.

LAN Airlines is a cargo and passenger company with affiliates in Argentina, Chile, Ecuador and Peru, and flights throughout the Americas and to Europe and the South Pacific. LAN Airlines operates and holds 49 percent of Lan Argentina. The rest is owned by two Argentine attorneys.

De la Fuente said LAN Argentina had a mixed fourth quarter as its domestic market share grew, but its planned launch of international operations was postponed.

He said the load factor, which measures how full airplanes fly, was 75 percent and capacity grew 50 percent in the fourth quarter compared with the third quarter.

LAN Argentina had 12 percent market share in December. In August last year the company said it was aiming for 14 percent by the end of 2005.

De la Fuente said LAN Argentina had a loss of $6 million in the fourth quarter because LAN and its local partners chose to expense start-up costs rather than capitalize and amortize over 20 years.

He said LAN Argentina had to postpone the launch of Buenos Aires-Miami service after safety ratings for air traffic in Argentina were changed, forcing LAN to make some modifications that it expects to complete in the second quarter so that the Buenos Aires-Miami service can begin in June.

By the end of 2006, LAN Argentina will be serving 10 destinations with 12 aircraft, De la Fuente said, up from seven destinations with five aircraft at the present time.

LAN's share price was up 0.48 percent to 4,220 pesos in afternoon trade on Thursday on the Santiago Stock Exchange.

Strike Staged Against Aerolineas Argentinas
9 March 2006

BUENOS AIRES, Argentina (AP) - Two unions representing pilots and mechanics launched a 24-hour strike against Aerolineas Argentinas on Thursday, one day after Argentina's flagship carrier rejected workers' wage increase proposals.

The pilots union posted a Web site statement declaring it would completely halt activities until midday Friday.

The pilots and a mechanics union had gone on strike for eight days late last year to demand higher wages. The unions and the company negotiated a 90-day truce that expired Monday, and subsequent negotiations have been rocky.

Aerolineas Argentinas issued a brief statement late Thursday saying the strike grounded 10,100 of the 19,500 passengers that had tickets booked for the day. The company canceled 29 flights.

The carrier didn't estimate the financial damage nor say how many passengers would be affected Friday.

In the U.S., the airline flies to Miami and New York.

Late Wednesday, Aerolineas Argentinas rejected union counterproposals for a solution.

Brazil's Gol airline expects to boost domestic market share
10 March 2006

SAO PAULO, Brazil (AP) - Brazil's no-frills airline Gol expects to boost its share of the country's domestic air travel market to at least 35 percent from the current 29 percent share by the end of this year, executives said Friday.

Gol Linhas Intelligentes SA plans to add 16 jets to its fleet this year to reach that goal, and recently offered seats on selected flights for 50 Brazilian reals (US$23.36) to get more Brazilians flying, said Richard Lark, Gol's vice president of finance.

The fleet additions will give Gol 58 planes, all of them Boeing 737s. Lark said about 9 million Brazilians take passenger flights every year, but the market could reach 20 million if airlines offer low enough prices to get more Brazilian travelers off long-haul buses and onto planes.

"There is an enormous number of people who travel on buses, who could switch if the price is low enough," Lark told analysts in a conference call.

Gol started service in 2001 and has since overtaken Brazil's Viacao Aerea Riograndense SA, or Varig, to become the second-largest domestic carrier in the country after TAM Linhas Aereas SA.

Gol's domestic market share in February was 29 percent while TAM's was 44 percent.

Lark said later Friday that Gol also is preparing to start flights to Santiago, Chile; Caracas, Venezuela; and Lima, Peru.

"We are busy trying to fill the holes in the continental network," Lark said.

He said the company has no plans to expand beyond Latin America for now.

Originally conceived as a domestic carrier in 2001, the company began international flights in 2005. In January, it added flights to Cordoba and Rosario in Argentina, Montevideo in Uruguay and Asuncion in Paraguay.

Chile's LAN Feb passenger traffic rose 5.8 pct

SANTIAGO, Chile, March 10 (Reuters) - LAN Airlines , Chile's dominant airline, said on Friday its February passenger traffic rose 5.8 percent from the same month a year ago.

LAN Airlines said international passenger traffic rose 7.3 percent in February year-on-year, while domestic passenger traffic decreased 1.7 percent.

New airlines bring competition to Chile skies
By Fiona Ortiz

SANTIAGO, Chile, March 13 (Reuters) - Chile's skies are getting crowded, with two new small airlines grabbing 27 percent of the expanding domestic passenger market, but they will need alliances and regional networks to compete with the deep pockets of dominant carrier LAN.

Sky Airlines, a privately held Chilean company, has grabbed 19 percent of the market in close to four years in a privately financed run against LAN Airlines that a Sky executive compared to bungee jumping -- the adrenaline rush of going up against a big, established company.

Analysts say the competition does not threaten LAN, the country's dominant carrier.

Sky hopes to boost traffic this year through a deal it is negotiating with Delta Air Lines Inc. to pick up the U.S. airline's international traffic coming into the capital of Santiago. Sky would feed it to seven other cities in Chile, the airline's executive director, Jose Manuel Rebolledo, told Reuters.

Rebolledo said a deal with Delta is the only way Sky can compete with LAN's huge international network that connects it with local flights.

"The quickest solution for us to fight that is connecting with other airlines," Rebolledo said.

Another competitor is Aerolineas del Sur, which belongs to Spanish travel group Marsans, and now has about 8 percent of the country's domestic passenger traffic.

Between them, Sky and Aerolineas del Sur, which started in Chile last year, plan to squeeze LAN's market share to about 60 percent over the next two years.

"People don't see it as much of a threat because domestic passenger business is a small part of LAN's business ... A lot can happen domestically before anything happens to LAN," said Ben Laidler, Latin America equity strategist for UBS.

LAN, with a huge cargo business and flights to Europe, Australia and throughout the Americas as well as affiliates in Argentina, Ecuador and Peru, reported $2.5 billion in sales last year.

LAN, a former state company that was privatized in the 1980s, needs competition or it runs the risk of being accused of monopolistic practices at home. Small operators are perfect competitors because their pockets aren't deep enough to start a price war, airline sector analysts said.

Chile, with a population of 15 million, had 3.2 million domestic passenger flights last year, up 7.1 percent from 2004, according to Chile's Civil Aviation Board. Airline executives forecast growth of 6 percent to 7 percent this year.

GRAVEYARD FOR COMPETITORS

Chile's small domestic market -- dominated by one of the region's most efficient airlines -- has chewed up and spit out small competitors in the past, and analysts said they are impressed with Sky's tenacity.

Rebolledo told Reuters that Sky's passenger traffic grew a bit more than 6 percent last year, and it is flying planes 65 percent full, on average.

The company plans to increase its market share to 30 percent from 19 percent by the end of 2007, adding three more aircraft to the nine it already owns or leases, he said, acknowledging that last year was tough due to the entry of Aerolineas del Sur.

"Any expansion that Sky has will have little effect on LAN ... and Aerolineas del Sur has not been able to take market share from LAN. They've been taking it from Sky, which could continue, depending on how aggressive they are," said Cesar Perez-Novoa, head of research at Celfin brokerage in Santiago.

LAN declined repeated requests for comment. On a recent conference call with analysts, LAN executives said they were not concerned about competition, partly because of a lack of aggressive marketing by the newcomers.

Sky, which had $55 million in revenue last year and hopes to break even by the end of this year, will soon launch a flight from Santiago to Lima, Peru, and is studying routes to Cordoba, Argentina, and Sao Paulo, Brazil, Rebolledo said.

NO PRICE WAR

Aerolineas del Sur owner Marsans also owns Argentina's leading airline, Aerolineas Argentinas, and is creating a new unit in Peru, with the idea being building a network of regional airlines.

Aerolineas del Sur General Manager Miguel Angel Maggi said the company's airplanes are 70 percent full on average. It plans to end this year with 12 percent to 14 percent of the Chilean market, and expand its fleet to eight aircraft from four.

All three competitors in Chile have similar prices, with LAN's controlled by the government to prevent it taking advantage of its dominant position.

"A price war is not our mentality, we want to be more original in our mistakes," Maggi said.

US cautions Venezuela on plan to curb flights

CARACAS, Venezuela, March 14 (Reuters) - The United States will suspend flights by Venezuelan airlines if Caracas carries out a threat this month to ban or restrict U.S. carriers flying to Venezuela, the U.S. ambassador said on Tuesday.

Venezuela's civil aviation authority, INAC, announced in February it would restrict or suspend access for U.S. airlines unless the U.S. Federal Aviation Administration lifts decade-old limits put on Venezuelan airlines for safety concerns.

"Hopefully that will not happen, because if that happens, it is not only possible or probable, but an absolute certainty the U.S. government and Transport Department would suspend flights by Venezuelan airlines," Ambassador William Brownfield said.

The FAA has proposed meetings with Venezuelan officials for April 17 to discuss the dispute.

The Venezuelan restrictions would trim flights by AMR Corp's (AMR.N: Quote, Profile, Research) American Airlines and completely halt operations by Continental Airlines (CAL.N: Quote, Profile, Research) and Delta Air Lines (DALRQ.PK: Quote, Profile, Research), should they take effect.

The airline spat is testing already strained relations between oil supplier Venezuela and the United States, which has clashed frequently with President Hugo Chavez over his ties to Cuba and his promotion of socialist revolution in the region.

Sao Paulo brothers lead low-cost revolution
Tom Phillips
16 March 2006
The Guardian

It must have seemed the strangest of ideas when the Folegatti brothers decided to go into the tourism business in 1987. Humberto was a physicist and Walter an engineer. By their own admission, neither knew the first thing about tourism.

"We didn't even know where the airport was," says Walter Folegatti, now the vice-president of BRA, one of the fastest-growing budget flight operators in Brazil. Twenty years on and the Sao Paulo-based brothers are heading a low-cost airline revolution that is sweeping across South America.

Brasil Rodo-Aereo, known as BRA, is part of a new generation of discount airlines changing the face of travel in the South American country. Having morphed from an airport transport company into an air operator in 1999, the business has seen ticket sales rocket in recent years and commands 6.3% of the domestic market.

The idea, says Mr Folegatti, is to create a new market by "popularising" air travel in one of the world's most unequal countries. "Any human being, no matter how humble or how little he has studied, would prefer travelling for three hours rather than for three days. Unfortunately, in Brazil we have 40 million people going hungry . . . We also have 40 million who are super-fortunate."

This leaves a potential market of about 100 million, he says, many who have never travelled by air before. It is a market into which BRA has made huge leaps since it began operating regular flights in November. Its fleet has grown from one to 10 planes in four years and, with 632 monthly flights, BRA is Brazil's largest charter service.

Brazil's low-budget air movement was born in 2001 with the foundation of Gol, a Brazilian answer to Ryanair.

Gol opened a new market in a country where plane travel has traditionally been out of the reach of all but a small elite. Gol's president, Constantino de Oliveira, recently said 11 % of his passengers were first-time flyers - people who had previously braved bus journeys of up to 78 hours on Brazil's badly maintained road network.

Recently, other companies such as BRA have entered the fray, undercutting Gol with flights to cities across Brazil. Gol operates about 430 flights daily, including routes to Argentina, Bolivia and Uruguay. It has branched out further, adding Paraguay to its list of destinations, with Caracas, the Venezuelan capital, and Santiago, Chile, expected to follow.

BRA is catching up fast. In 2005 it carried about 1.6 million passengers, an 80% rise on the 2003 figure. By next year the Folegatti brothers hope to be operating regular flights to Britain, Italy, Portugal, Spain and the Netherlands, reaching a market of 10 million people.

Constantino de Oliveira, chief executive of Gol, which grew from a bus company to an airline carrying 23 million people.

Colombia Says 7 Cos Interested In Bid For Bogota Airport
15 March 2006

BOGOTA (Dow Jones)--At least seven companies are interested in bidding for a 17-year concession on the Bogota El Dorado airport, to be held on July 9, President Alvaro Uribe's press office said Tuesday in a statement.

Until now, the civilian airport authority sold bidding forms to seven local and foreign companies, the statement said. Companies interested have until April 18 to buy the forms, it added.

The companies interested in the bid include Spain's state-owned Aeropuertos Espanoles y Navegacion Area and Abertis Infraestructuras SA (ABE.MC). China-based Stratis Cia. and Mexican construction companies MNV and Pisa also approached the government.

Two Colombian construction firms, Conconcreto SA (CONCONCRE.BO) and Mario Huertas Cote, also bought the forms.

"The process is going beyond expectations," said Andres Uriel Gallego, Colombia's transport minister.

The airport authority, known as Aerocivil, opened the auction process on Dec. 14 and plans to pick a winner on July 9. The winner will run the biggest Colombian airport and will commit to build new terminals for international and domestic flights and another one for freight. The investments required would total around $600 million.

The Colombian government is still evaluating the criteria to determine which bidder would win the auction. The process will take into account the investment commitments and the share of the airport revenues to be transferred back to the government, Aerocivil's spokesman, Martin Gonzalez, said in December.

The Colombian government already granted concessions to run and upgrade the airports of Cali, the country's third-biggest city, and Cartagena, the main tourist destination in the Caribbean coast.

The government also plans to auction concession rights on the smaller airports from the Caribbean islands of San Andres and Providencia, located off the shores of Nicaragua.

Aerolineas Argentinas Pilots, Mechanics Mull New Proposal
16 March 2006

BUENOS AIRES (Dow Jones)--Airline pilots and mechanics unions are studying new salary proposals drafted by the government in efforts to resolve a simmering labor dispute with flagship carrier Aerolineas Argentinas (AR.YY), according to widespread media reports published Thursday.

The APLA pilots union and APTA mechanics union met at the Labor Ministry with government officials Wednesday. During the meeting, the workers received fresh proposals to study. But the unions are reportedly dissatisfied with the offers, saying they are still inadequate.

Spokesmen at APLA, APTA and Aerolineas Argentinas weren't available for comment Thursday.

The head of APLA told financial daily El Cronista that the workers want new proposals directly from the company.

"The only thing we have is an offer that the Labor Ministry made, but our conflict is with Aerolineas and we'd like for a deal to be done with them," Jorge Perez Tamayo was quoted as saying. "We don't see it as a bad thing that the government helps out, but we want the company to approach us with their own initiatives."

According to media reports, the Labor Ministry is proposing a 21% hike in pilots' salaries and a 25% increase for mechanics. The unions have requested 45% and 70%, respectively. In addition, the government-proposed wage hikes are "non-remunerative," meaning they are not factored into calculations for pensions and other benefits. The unions are requesting "remunerative" salary increases that would imply expanded benefits.

"This is far from what the workers are looking for," APTA Secretary-General Juan Pappalardo told local news agency Diarios y Noticias.

The salary dispute has been brewing for several months now. In late 2005, the two unions staged an eight-day strike that ended in a 90-day dispute. That period expired on Monday of last week. The workers went on strike for 24 hours on Friday, grounding 10,100 passengers.

Brazil Creates New Civil Aviation Agency
20 March 2006

SAO PAULO (Dow Jones)--Brazil's President Luiz Inacio Lula da Silva will swear in the first directors of his new National Civil Aviation Agency, or Anac, on Monday, thus officially opening the agency.

The new agency takes over from the military-run Civil Aviation Department, which has ruled over civil aviation in Brazil for the past 75 years.

The creation of a new agency is expected to bring aviation politics closer to the center of the political agenda and limit military influence.

However, it will take time for the agency to operate fully - it still needs to fill 394 posts. DAC will slowly hand over control of the sector. The government has given Anac five years to replace all military officials in control of the sector.

I hope TAM choses Embraer to replace the Fokkers. The Fokkers really suck.

^^^^ I HOPE SO TOO :)

Venezuela, US Agree To Avoid Proposed Airline Ban - Envoy
23 March 2006

CARACAS (AP)--The U.S. and Venezuela have reached an agreement aimed at avoiding a proposed ban on flights by most U.S. airlines to the South American country, the U.S. ambassador said Thursday.

William Brownfield said officials from both countries had reached a "temporary" agreement involving a visit to Venezuela by the U.S. Federal Aviation Administration, which would work with local authorities to improve local safety standards.

Venezuelan authorities want the FAA to end safety restrictions that prevent Venezuelan airlines from flying to the U.S. and had warned that they would decide on March 30 whether to impose a ban on U.S. flights.

"I think our two governments have resolved, at least for the moment, the civil aviation problem. We have reached an agreement, the FAA is sending a technical team here to Venezuela," Brownfield said.

"They are going to work here until they resolve the problem, or at least reach an agreement with (Venezuela's) National Civil Aviation Institute," he added.

Brownfield had warned on March 14 that Venezuelan flights to the U.S. would be banned if Venezuela ever prohibited flights by most U.S. airlines - including AMR Corp.'s (AMR) American Airlines, Delta Air Lines Inc. (DAL) and Continental Airlines Inc. (CAL) - to its territory.

All these arcticles about Gol, but in fact their prices have been so HIGH-FARE lately...

U.S. ambassador says airline ban talks with Venezuela close to "permanent" solution
By NATALIE OBIKO PEARSON
28 March 2006

CARACAS, Venezuela (AP) - The American ambassador said Tuesday that U.S. and Venezuelan aviation officials were close to a "permanent solution" averting a ban on U.S. airlines and ending a dispute over U.S. restrictions on Venezuelan carriers.

Venezuela claims the safety-based restrictions have locked Venezuelan airlines out of the U.S. market. It has threatened to retaliate by blocking nearly all flights by U.S. carriers starting Thursday.

A delegation from the U.S. Federal Aviation Administration is in Caracas this week to evaluate Venezuela's claim that it has improved airline safety and regulation.

"My hope is that during this week they will conclude these consultations that will permit a permanent solution," U.S. Ambassador William Brownfield said.

"The two governments basically have an agreement that the FAA will conclude its job ... as soon as possible and the INAC (Venezuela's National Aviation Institute) is going to suspend the measures against the U.S. air companies," he said.

The FAA has ranked Venezuela with a category 2 safety rating since 1995, preventing Venezuelan from flying their own planes to the United states or from starting new services.

Two Venezuelan carriers operate flights to the U.S. by leasing planes and crew from American companies.

Venezuela says a 2004 audit by the U.N. International Civil Aviation Organization found that the country met 88 percent of recommended international aviation safety standards, up from 39 percent in 1999.

The FAA wasn't expected to decide whether to upgrade Venezuela's safety rating until after the delegation returns to Washington on Thursday.

Venezuela has said that if the FAA fails to grant it category 1 status by March 30, it will prohibit all flights by Houston-based Continental Airlines Inc. and Atlanta-based Delta Air Lines Inc., and restrict flights by Fort Worth, Texas-based AMR Corp.'s American Airlines.

Nelson Ramiz, president of the leading Venezuelan airline Aeropostal, said the U.S. restrictions have cost the company US$3 million a year in leasing fees, while unfairly allowing U.S. airlines to dominate the routes.

"I've been competing with a 900-pound gorilla with my hands tied and I will love it, enjoy it, to compete with that gorilla with my hands loose," he told The Associated Press.

Brownfield said the FAA would base its decision on technical criteria.

"This has nothing to do with politics or commercial (concerns)," he said. "For us, the idea of more competition is not a bad idea, it's a good idea."

Seven killed when plane crashes into soccer pitch in Medellin, Colombia
29 March 2006

BOGOTA, Colombia (AP) - Seven people, including two young boys, died when a small plane crashed Wednesday into a soccer field in Medellin, Colombia, authorities said.

The Cessna single-prop plane was carrying a pilot and four passengers when it crashed on a university campus two minutes after takeoff, killing all aboard and the boys, who were on the soccer field. Six other children at the crash site suffered light burns, said Martin Gonzalez, a spokesman for Colombia's civil aviation regulator.

Authorities said a man identified as retired air force pilot Jose Sierra, who was at the plane's helm, was found alive but died at a local hospital. Two of the passengers were military personnel, they said.

The plane was en route from Medellin, Colombia's second largest city, to the nearby town of Ituango.

Airline workers take over two Bolivian airports
30 March 2006

LA PAZ, Bolivia (AP) - Airline workers took over three airports Thursday, demanding the nationalization of Lloyd Aereo Boliviano, which is on the verge of bankruptcy.

Flights to the cities of Cochabamba and Tarija were stopped as hundreds of LAB employees used airplanes, cars and mobile stairways and other equipment to block runways. Flights to the city of Santa Cruz have been delayed.

Television footage showed riot police shooting canisters of tear gas and violently clashing with workers as they neared the airport runways in Cochabamba, leaving a few injured.

The woes of LAB -- just-under-half-owned by Bolivian public entities -- began in February when its pilots and other workers walked off the job, demanding back wages as well as payment of the carrier's debt to the public pension system.

The carrier has a total of more than US$160 million (euro133 million) in debt.

The Bolivian government intervened in the management of airline several weeks ago, ending that strike. But new walkouts resumed last week after the Constitutional Court declared the intervention illegal and LAB president Ernesto Asbun returned to the helm.

Many of its more than 2,000 workers accuse Asbun of trying to bring LAB into bankruptcy as a prelude to forming a new company, and have said they will not return as long as he heads up the airline.

Angel Zaballa, who headed the government intervention of LAB, has blamed the company administrators for the financial crisis, calling it the "fruit of years of mismanagement."

New leftist President Evo Morales went further, describing Asbun as "mafioso" and "criminal," saying he had bribed the Constitutional Court to rule in his favor.

The carrier is also facing legal action from U.S.-based Pegasus Aviation, which has filed suit in Miami to have four Boeing jets it rented to LAB impounded if they land in the United States.

Bolivia's airports under military control after strike disrupts flights
By FIONA SMITH
31 March 2006

LA PAZ, Bolivia (AP) - Military and police forces took control of Bolivia's major airports Friday, a day after hundreds of striking airline workers blocked runways and disrupted flights to three airports.

The actiono was ordered by the government to "safeguard the lives and physical safety of Bolivians and avoid an airline accident," said Hector Arce, the vice minister of governmental coordination.

Angry employees of carrier Lloyd Aereo Boliviano, which is on the verge of bankruptcy, demanded the company's nationalization and clashed with police at airports Thursday.

The woes of the airline began in February when its pilots and other workers walked off the job, demanding back wages as well as payment of the carrier's debt to the public pension system. The carrier has more than $160 million in debt.

The company is controlled by foreign investors, with the Bolivian people -- not the government -- holding just under 50 percent of the shares. The Bolivian portion is held in a trust, managed by foreign financial institutions, that cannot legally be touched by the Bolivian state.

The government intervened in the management of the airline several weeks ago, ending the earlier strike. But new walkouts resumed last week after the Constitutional Court declared the intervention illegal.

Flights in Bolivia were operating at near normal levels Thursday although Lloyd Aereo Boliviano has indefinitely canceled all its international flights.

19 people killed in plane crash near Rio de Janeiro

RIO DE JANEIRO, April 1, 2006 (AFP) - A twin-engine passenger plane crashed north of Rio de Janeiro, killing all 19 people on board, a Team airline spokesman said Saturday.

The Brazilian Civil Aviation Administration said the plane took off from Macae at around 2020 GMT Friday and headed toward Rio de Janeiro but disappeared from radar screens 20 minutes later.

Its wreckage was discovered by a rescue team in a mountain range about 200 kilometers (124 miles) north of Rio de Janeiro early Saturday, airline spokesman Davi Farias told the local news agency Estado.

There were no survivors, he said.

Firefighters who went searching for the plane found it after local residents directed them to the crash site.

"A plane flew over low, heading toward the mountains, and then we heard a big boom," one resident told local radio.

The Czech-made Lat 410 aircraft had 17 passengers and two crew members on board.

I heard Tam will buy ERJ 190 to replace old the fokker.

Brazil's Varig airline asks to delay payments to some creditors
By VIVIAN SEQUERA
7 April 2006

BRASILIA, Brazil (AP) - Brazil's financially strapped flagship airline has asked the government to delay payments to some of its creditors but is not in danger of grounding flights, the company's president said Friday.

Varig's President Marcelo Bottini met with Brazil's Defense Minister Waldir Pires in Brasilia, the nation's capital, and asked the government for a three-month delay to pay Infraero, Brazil's airport authority, and a two-month delay to pay BR Distribuidora, an affiliate of Brazil's state-owned oil company Petrobras.

Bottini denied reports, however, that Varig, or Viacao Aerea Rio-Grandense SA, has been forced to cancel flights and might soon stop flying altogether.

"I have no doubt: Varig will not stop flying," he told reporters after meeting with the minister. "Varig means too much for Brazil. It has been flying for 80 years."

The Brazilian newspaper O Globo on Friday reported the company's financial troubles had forced it to cancel several flights Thursday, but Varig said those flights were canceled because of technical difficulties.

According to figures released Friday by the Brazilian civil aviation department, Varig's share of the domestic market dropped to about 19 percent in March compared with 28 percent in March 2005. In February, the company's market share was just above 19 percent.

While Varig maintained its leadership in Brazil's international market, it's share of flights slipped to 70 percent from 79 percent in March 2005 and 71.5 percent in February.

Varig is saddled with an estimated US$3.3 billion (€2.7 billion) in debt, and the federal airport administration has threatened to ground the airline if it fails to pay its airport fees before each flight.

Brazil's Finance Minister Guido Mantega said Friday that there will be no federal cash bailout for the airline.

"There is no money in the federal budget for this," he told the local Agencia Estado news service.

According to reports in the local press, Varig is in talks with Brazilian carrier OceanAir Lineas Aereas and government officials to initiate a code-sharing agreement that might allow OceanAir to assume some of Varig's loss-making routes.

OceanAir, owned by Brazil's Sinergy group, was set up as an air taxi firm to serve Brazil's oil industry but has expanded to operate regional routes to more than 30 cities.

Earlier this week, VarigLog, OceanAir's former cargo wing, made a US$350 million (€287 million) proposal for Varig's commercial operations.

Star Alliance aims to boost ailing Brazilian member Varig

ZURICH, April 7, 2006 (AFP) - The Star Alliance of 16 international airlines hopes to help its struggling Brazilian member Varig by trying to boost business in South America, senior executives said Friday.

Wolfgang Mayrhuber, the boss of German carrier Lufthansa, one of the founder members of the decade-old and expanding alliance, said Varig's woes were a concern for all Star Alliance carriers.

"Like in any good family, you don't only share the sunshine but also the hailstorm, and the best thing we can do is share our best practices, helping them by driving business into their area," Mayrhuber told reporters.

"Clearly, every partner that joins Star has customers who want to go to South America, that want to go to Brazil. That's the way we can help them," he said during a ceremony in Switzerland to mark the arrival of the latest member, Swiss International Air Lines.

Varig has been under bankrupcty protection since June 2005.

It has recently been unable to honour contracts on leased aircraft, which make up 80 percent of its fleet.

The carrier also owes 116 million reais (50 million dollars) to Infraero, Brazil's airport authority, and has reportedly faced an ultimatum to pay up.

In 2005, Varig lost its second place in the domestic flight market in Brazil to low-cost competitor Gol.

Varig was Brazil's leading domestic carrier until it was overtaken more than two years ago by TAM. Its market share has dropped to just under 27 percent.

Glenn Tilton, the boss of the US carrier United Airlines, another Star Alliance member, said he could understand Varig's problems.

Chicago-based United recently emerged from three years of bankruptcy protection during which it dramatically reduced the size of its fleet, laid off 20,000 employees and slashed 7.0 billion dollars from costs.

"We've been through a complex restructuring for three years and come out significantly stronger," Tilton told reporters.

"I think that the process is one that unfortunately the alliance is familiar with. Varig is going to have to go through it."

"Investment in restructuring is an investment for the alliance," he added.

One proposal to save Varig foresees a cut in staff numbers from 11,000 to 5,000, and a smaller fleet of 48 aircraft against the current 71. But that has not been well-received by the airline's creditors.

So do you dare hug the star alliance president if he is your brother? :weirdo: :nuts:

Brazil's Fin Min Rules Out Cash Bailout For Varig -Estado
7 April 2006

SAO PAULO (Dow Jones)--Brazilian Finance Minister Guido Mantega said Friday that there will be no federal cash bailout for ailing airline Viacao Aerea Rio-Grandense (VAGV4.BR), or Varig, according to the local Estado newswire

"There is no money in the federal budget for this," he said during a press conference in Rio de Janeiro.

The flagship airline has racked up debts, which are estimated at over 7 billion Brazilian reals ($3.3 billion), and is currently in the restructuring phase of bankruptcy proceedings.

Varig's lack of credit means it is late on key operating payments. As a result, the airline has been canceling flights and runs the risk of having its planes grounded for nonpayment of airport fees in Brazil.

Mantega said that he doesn't see what the government can do about Varig.

The government is Varig's main creditor and owns the main agencies with which the airline is behind on operating payments, including Infraero, the National Airport Authority, and BR Disribuidora, Varig's main fuel supplier.

The workers and some creditors have been holding out in the expectation that the government won't let Brazil's main international carrier die.

Presidential Chief of Staff Dilma Rousseff said late Friday that the government will complete its analysis of the Varig situation next week but there is no chance that Varig will stop flying in the short term.

Earlier in the day, Varig President Marcelo Bottini met with new Defense Minister Waldir Pires in Brasilia where he asked help in securing a $200 million loan from Brazil's National Development Bank, or BNDES, and a moratorium on bill payment to government agencies for three months.

"The idea is that we get credit until we negotiate with a new investor," he told journalists.

He said the $200 million loan would allow Varig to pay the airplane leasing companies, among other costs.

Varig faces a battle against time. Cash restrictions mean it can't pay for vital plane maintenance and only 54 of its 71 planes are currently flying. Meanwhile, customers are losing confidence in the airline.

Bottini said the company and the creditors are assessing a number of offers for its operations.

Earlier this week, VarigLog, its former cargo wing, made a $350 million proposal for Varig's commercial operations. VarigLog, which is owned by a group of Brazilian businessmen and U.S. investment fund Matlin Patterson, proposed setting up a new Varig to take over operations, leaving the company's massive debts with the old company.

Meanwhile, he confirmed the company is in talks with Brazilian airline OceanAir over a code share deal.

Chile's LAN March passenger traffic rose 1.3 pct

SANTIAGO, Chile, April 11 (Reuters) - Chile's dominant airline, LAN Airlines , said on Tuesday that passenger traffic rose 1.3 percent in March from the same month last year.

The growth was weaker than in previous months. LAN cited a fall in domestic passenger traffic and the fact that the Easter holiday was in March last year and is in April this year.

LAN said in a news release that its total passenger capacity rose 6.4 percent, and its load factor -- which measures how full airplanes fly -- fell 3.7 percentage points to 72.9 percent since passenger numbers did not grow as much as capacity.

International passenger traffic, which represented 86 percent of LAN's total passenger traffic in the month, rose 1.8 percent in March from a year ago, but the load factor fell due to an increase in flights to Europe and the Asian Pacific.

Domestic passenger traffic fell 1.3 percent in March, compared with March last year, and the load factor also fell on domestic flights, mainly due to the change in Easter Week, the company said.

Cargo traffic grew 17.1 percent in March, LAN said.

Authorities block deal to aid troubled Brazil airline
11 April 2006

RIO DE JANEIRO, Brazil (AP) - Aviation authorities blocked a deal that would have thrown a lifeline to Brazil's troubled flagship airline as employees held protests in the nation's capital on Tuesday calling for a federal bailout.

Brazil's Civil Aviation Authority shot down a proposed deal that would have let a small local airline, OceanAir, take over some of the unprofitable routes of Viacao Aerea Rio-Grandense, or Varig, the company's press office said.

The deal was vetoed on the grounds that flight slots and airport space cannot be negotiated, the Varig press office said.

Varig is reeling under an estimated US$3.3 billion (€2.7 billion) in debt and is currently in the restructuring phase of bankruptcy proceedings.

In recent days, the airline has been forced to cancel flights because it cannot meet operating payments. It also risks having its planes grounded for nonpayment of airport fees in Brazil.

On Tuesday, some 300 Varig employees boarded a chartered jet to Brasilia, the nation's capital, to call on the federal government to bail out the company, which employs 11,000 people.

On Friday, Varig President Marcelo Bottini went to Brasilia to seek a moratorium on debt payments and a cash injection in the company.

However, Brazilian Finance Minister Guido Mantega said separately Friday that there will be no federal cash bailout, causing Varig stocks to slide.

Government officials are still assessing what can be done for the flagship firm.

Varig's former cargo operation, VarigLog, last week offered US$350 million (€287 million) for Varig's commercial operations. VarigLog, which is owned by a group of Brazilian businessmen and U.S. investment fund Matlin Patterson, proposed setting up a new Varig to take over operations, leaving the company's massive debts with the old company.

Meanwhile, Varig is studying plans to cut costs by returning 15 planes to leasing companies. It is currently only running 54 of its 71 planes because it lack funds to maintain all of them. It is also looking at cutting loss-making regional flights.

Brazil Officials Discuss Varig Closure Contingency Plans
13 April 2006

SAO PAULO (Dow Jones)--Brazilian civil aviation officials met with Presidental Chief of Staff Dilma Rousseff on Wednesday to discuss contingency plans in case Brazil's ailing flagship airline Viacao Aerea Rio-Grandense (VAGV4.BR), or Varig, folds, a National Civil Aviation Authority, or Anac, spokesman said Thursday.

Varig has been in trouble for some time, weighed down by debts of approximately 7 billion Brazilian reals ($3.3 billion), and is currently in the restructuring phase of bankruptcy proceedings.

Varig's lack of credit means it is late on key operating payments and can't afford vital maintenance on a number of its planes. A large portion of these operating debts are with state-owned companies but government officials, including Finance Minister Guido Mantega, have said public money won't be used to bail out the company.

Meanwhile, on Wednesday, the Social Security Ministry announced it would take over the administration of the Aerus pension fund, which manages pensions for Varig workers and is a major creditor, to ensure the funds aren't used to prop up the firm.

Creditors could lodge court requests to wind up the company as soon as next week, said the local daily Estado de Sao Paulo on Thursday.

Analysts agree the tendency will be for local airlines TAM SA (TAM) and Gol Linhas Aereas Inteligentes (GOL) to take over most of the local routes currently run by Varig should the company fold. However, they can't fill many of the international routes immediately and foreign airlines would step in there.

TAM and Gol have already submitted contingency plans to Anac, should Varig stop flying, said the paper report.

Varig creditors are still assessing a proposal from VarigLog, its former cargo unit, to buy commercial operations for $350 million. VarigLog proposed setting up a new Varig to take over operations, leaving the company's massive debts with the old company.

VarigLog was bought by a company called Volo do Brasil for $46 million in January. At the time it was reported that Volo do Brasil was created by U.S. investment fund Matlin Patterson to buy the asset. However, a VarigLog spokesman maintained that Volo do Brasil is led by Brazilian businessmen Marco Antonio Audi, Marcos Haftel and Luiz Eduardo Gallo, while Matlin Patterson has a stake of under 20%.

Varig workers have resisted restructuring plans over the last five years in the belief the government would bail out the flagship airline.

Brazil's indebted Varig recommends VarigLog offer

RIO DE JANEIRO, Brazil, April 14 (Reuters) - The management of troubled Brazilian airline Varig will recommend that its Administrative Council accept a higher offer from its former freight subsidiary VarigLog, Varig's press office said.

Burdened by about 7 billion reais ($3.3 billion) in debt, Varig has been struggling to find ways to stave off collapse.

The decision, late on Thursday, was taken after VarigLog, raised its offer for Viacao Aerea Rio-Grandense S.A. (Varig) by $50 million to $400 million, Varig said.

VarigLog, owned by a group of Brazilian businessmen and U.S. investment fund Matlin Patterson, said that its offer will ensure that Varig has sufficient funds to keep operating.

VarigLog said it planned to service 17 Varig planes currently grounded due to lack of maintenance and to settle the payments backlog on leased planes. Varig had been considering the return of 15 planes to leasing companies to cut costs.

As Brazil's former flagship carrier, Varig is one of the country's best-known companies globally.

But it has been struggling for years, racking up debt and losing market share to rivals such as TAM Linhas Aereas and Gol Linhas Aereas Inteligentes .

Last June, Varig became the first major company to seek protection from creditors under Brazil's new bankruptcy law, which lets companies work out reorganization plans.

VarigLog's offer still has to be approved by Varig's creditors, which include General Electric Co. , Boeing Co. and several state-owned entities, such as oil giant Petrobras and the government's airport authority Infraero.

Brazil's Aviation Agency Vetoes VarigLog Sale To Volo
19 April 2006

SAO PAULO (Dow Jones)--Brazil's National Civil Aviation Authority, or Anac, announced late Tuesday that it had vetoed the sale of VarigLog, the profitable logistics arm of ailing airline Viacao Aerea Rio-Grandense (VAGV4.BR), or Varig, to Volo do Brasil in a move that further complicates the restructuring of the airline.

Volo do Brasil closed the deal to buy VarigLog for $46 million in January. However, Anac ruled that the deal had gone ahead without necessary government approval, said an Anac spokeswoman.

The announcement potentially scraps a $400 million bid made by VarigLog, on behalf of Volo, for Varig's operations. This is the only bid for the company that is currently having trouble meeting its operational payments due to a lack of credit and desperately needs a cash injection.

Varig entered into bankruptcy protection in June and is currently struggling under a debt load of around 7 billion Brazilian reals ($3.3 billion).

In January, it was reported that Volo do Brasil was created by U.S. investment fund Matlin Patterson to buy the asset. However, a VarigLog spokesman maintained that Volo do Brasil is led by Brazilian businessmen Marco Antonio Audi, Marcos Haftel and Luiz Eduardo Gallo, while Matlin Patterson has a stake of under 20%. Foreign firms aren't allowed to own more than 20% of Brazilian airlines.

The ownership situation led the National Airline Companies Association, or Snea, to ask Anac to review the deal.

A VarigLog spokesman, speaking on behalf of Volo, said the company is studying the decision but Anac's issues with the deal appear to be of a bureacratic nature.

However, the true reason for the veto was that Marco Antonio Audi has pending tax issues with the inland revenue department and Volo do Brasil's capitalization of $1 million is incompatible with the purchase of VarigLog, Anac President Milton Zuanazzi told the local business daily Valor Economico.

U.S. aviation agency raises Venezuela's safety ranking, avoids airline ban
By NATALIE OBIKO PEARSON
21 April 2006

CARACAS, Venezuela (AP) - U.S. aviation authorities upgraded Venezuela's safety ranking, averting a ban that would have blocked most U.S. airlines from flying to the country.

The U.S. Embassy in Caracas said in a statement Friday that the "Federal Aviation Administration is raising the safety rating of Venezuela to Category 1."

The decision came after an FAA team visited Venezuela late last month to examine Venezuelan airlines' planes and procedures within the country's aviation authority.

The FAA had recognized the "efforts to improve the level of aviation safety oversight in Venezuela" made by the National Aviation Institute, or INAC, the statement said.

The Venezuelan government had protested its lower Category 2 ranking, which prohibited Venezuelan airlines from flying their own planes to the U.S. or from launching new services such as expansions in routes.

The restrictions, in place since 1995, forced Venezuelan airlines to rent planes and crew for flights to or from the United States.

Venezuela had set an April 25 deadline by which the FAA had to drop the restrictions or face retaliatory measures.

The decision narrowly averts a ban that threatened to cause an airline crisis between the two countries.

Venezuela had threatened to block all flights by Houston-based Continental Airlines Inc. and Atlanta-based Delta Air Lines Inc., and restrict most flights by AMR Corp.'s American Airlines of Fort Worth, Texas.

U.S. Ambassador William Brownfield had countered that his government in turn would "with absolute certainty" prohibit Venezuelan flights to the United States.

The U.S. Embassy called the decision "excellent news for the thousands of passengers who fly between the United States and Venezuela."

"The passenger is the big winner ... more competition will bring the fares down," said Nelson Ramiz, the president of Venezuela's largest airline, Aeropostal, welcoming the decision.

Venezuela had claimed that the FAA restrictions locked its carriers out of the U.S. market and were no longer justified after improvements to airline safety and regulation. Local carriers lost 90 percent of the U.S.-Venezuela market to their American competitors after the restrictions were imposed.

The FAA said the standards that must be met are imposed by the International Civil Aviation Authority, not the FAA. Two audits of Venezuela's civil aviation authority by ICAO, the United Nation's technical agency for aviation, showed "increasing improvements," the FAA said.

Venezuelan carriers -- such as Aeropostal and Santa Barbara, which operated flights to the U.S. by leasing planes from American companies -- are poised to benefit from the decision.

Aeropostal's Ramiz told The Associated Press that his airline will save as much as US$4 million (euro3.25 million) a year in costs.

The airline's flights to Miami presently generate US$60 million (euro48.72 million) in revenues -- that is expected to grow by 40 percent with the loss of restrictions, he added.

An INAC spokesman, speaking on condition of anonymity before the decision, said other local carriers like Venezuela's state airline Conviasa were considering acquiring new equipment and personnel in anticipation of being able to fly to the U.S.

Ramiz said airlines will still need to have their technical operations formally approved by U.S. authorities before flying, a process that takes several months and which Aeropostal hopes to conclude by September.

"Our pilots are ready," Aeropostal's Ramiz said. "Technically, we are ready to fly."

Brazil's Varig workers demand govt aid for rescue

RIO DE JANEIRO, Brazil, April 21 (Reuters) - Staff from Brazil's Varig protested on Friday in Rio de Janeiro ahead of a visit by President Luiz Inacio Lula da Silva, demanding help to save the indebted airline.

Lula was due to attend a ceremony at the Natural History Museum to celebrate Brazil's self-sufficiency in oil.

Burdened by debts of about 7 billion reais ($3.3 billion), Brazil's former flagship carrier has been struggling to stave off collapse.

"We're taking the opportunity of Lula's visit to make clear that we're not demanding public money," Varig pilot Bruno Parga, one of the protest leaders, told Reuters by phone. "We want to use our pension fund to save the company as well as credit to keep it flying."

Earlier, pilots and ground staff marched along Rio's famous tourist beaches calling for public support.

They demanded that the government grant a two-month delay to pay for fuel supplied via state oil company Petrobras as well as a five-month delay to settle airport taxes.

Varig used to be Brazil's biggest airline, but since 2003 its share of the passenger market has fallen to under 20 percent -- less than half that of current market leader TAM .

http://images.bloomberg.com/nav/bblogo.gif

Gol's 1st-Quarter Profit Climbs 37% on Rising Sales

April 24 (Bloomberg) -- Gol Linhas Aereas Inteligentes SA, Brazil's biggest airline by market value, said first-quarter profit rose 37 percent as sales increased and the carrier gained market share.

Net income rose to 179.8 million reais ($85 million), or 92 centavos a share, from 131 million reais, or 70 centavos, a year earlier, the Sao Paulo-based company said in an e-mail statement, citing U.S. accounting standards. Net revenue jumped 47 percent to 863 million reais, and operating profit rose 28 percent to 303 million reais.

Sales at Gol were bolstered by faster growth in South America's biggest economy and fares that are on average 25 percent lower than those of competitors. The airline's domestic market share rose to 30 percent in the first quarter Gol said. The carrier said its market share may rise to 35 percent this year from 27 percent in 2005 as Viacao Aerea Rio-Grandense SA cut service while trying to reorganize its debt under bankruptcy protection.

During the first quarter, Gol added three aircraft to its fleet, 55 daily flights and four new international destinations in Argentina, Uruguay and Paraguay.

Gol's shares fell 2.21 reais today at the Sao Paulo stock exchange to close at 74.29 reais before the earnings were released.

link: http://www.bloomberg.com/apps/news?pid=10000086&sid=aamZcZIe7ISU

Brazil Gol to add Peru, Chile, more local flights

RIO DE JANEIRO, Brazil, April 25 (Reuters) - Brazil's No. 2 airline Gol plans to start flying to Peru and Chile and add more domestic flights amid growing demand and while traditional flagship carrier Varig is suffering a profound crisis.

Gol Linhas Aereas Inteligentes Chief Executive Constantino de Oliveira also said on Tuesday the low-cost airline would offer more international flights on existing routes.

He expected to start flying to Chile in six months and to Peru possibly later this year. Gol already flies to Argentina, Paraguay and Uruguay. De Oliveira also said a plan to set up a joint venture in Mexico with an unspecified Mexican partner was likely to go ahead in the second half of this year.

Set up in 2001, the airline, whose business model is based on low-cost, low-fare carriers in the United States and Europe, expects to double its current fleet to 90 aircraft by 2011. It will receive 13 planes this year alone.

On Monday, Gol posted a record net profit of 179.8 million reais ($85 million) in the first quarter of 2006, up 37 percent from a a year earlier level. Net revenue in the quarter grew 46.5 percent from the year before to 863 million reais.

Gol said its domestic market share reached 30 percent in March and its slice of the international market rose to 5 percent. Its occupancy rate was 71 percent in the period.

Restricting his comments on the financial and operating problems at Varig, which had been the market leader up to 2003 and is now third-ranked after Gol and No. 1 TAM , de Oliveira only said his company was vying, along with other airlines, for routes abandoned by Varig.

He also said Gol's development plan did not take into account Varig's demise. The heavily indebted Varig is operating under bankruptcy protection.

Brazil's BNDES Could Help Varig Airline - Govt Official

SAO PAULO (Dow Jones)--Brazil's embattled flagship airline Viacao Aerea Rio-Grandense, or Varig (VAGV4.BR), could receive financing from Brazil's National Development Bank, or BNDES, to help in its restructuring, Presidential Chief of Staff Dilma Rousseff said late Wednesday.

"Without doubt, the BNDES is willing to help," she told journalists in Brasilia.

The comments represent an about-face in government policy. Previously, several government officials had said there was no public money available to bail out the airline.

Varig has been in trouble for some years amid mounting debts, which have spiraled to more than 7 billion Brazilian reals ($3.3 billion). The airline recently had to ground planes and cancel flights because it couldn't meet operating payments, and it risks having all its domestic flights stopped for nonpayment of airport fees and fuel suppliers in Brazil.

If public money is put into the airline, it is fundamental that the company is taken over and run by an investor that can make it work, Rousseff added.

Varig creditors are considering a $400 million bid from VarigLog, the airline's former cargo wing. VarigLog is owned by a group of Brazilian businessmen and U.S. investment fund Matlin Patterson. Varig creditors have also been asked to consider an offer to finance the recuperation of the company made by Jaime Toscano, a consultant, on behalf of a group of investors.

Despite the operational problems, Varig remains the dominant Brazilian carrier on the international market. However, it has fallen behind TAM SA (TAMM4.BR) and no-frills airline Gol Linhas Aereas Inteligentes SA (GOL) on the domestic market.

Chile Airline Lan 1Q Net Profit $79.7M Vs $46.3M
27 April 2006

SANTIAGO (Dow Jones)--Chilean airline Lan SA (LFL) posted a first-quarter net profit of $79.7 million, a 72% jump from the $46.3 million it registed in January-March 2005, according to its filing to Chilean securities regulator SVS late Wednesday.

Lan's first-quarter profit was in line with the near $80 million analysts expected, according to a recent Dow Jones Newswires poll.

The filing with the securities overseer included a one-off gain due to the effect of the accounting change.

Lan's change in the way it accounts for its fleet management stems "from the growth that operations and fleet of Lan have experienced, along with aligning the company's policies with the principal international" carriers, Lan said in its announcement of the measure last month.

External auditors have approved the change, which tacked on $33.7 million in one-off gain in non-operating profits, after taxes.

Over the same reporting period, sales rose 20% to $728 million from $607 million in the first quarter of 2005, while operating profit reached $69 million, up 21% from $57 million.

Meanwhile, the rising cost of jet fuel has continued to weigh on Lan, squeezing margins and outweighing increased traffic figures despite fuel surcharges in passenger and cargo fees.

In a separate statement, Lan pointed out that rising fuel costs "increased operating costs by $37.4 million during the quarter, in comparison to the same period a year ago."

The airline is one of the largest in the region, with units in Chile, Argentina, Peru, Ecuador and the Dominican Republic. It's also the largest cargo carrier in Latin America.

Company Web site: http://www.lan.com

We didnt get confirmation on what planes TAM decided to buy. Anybody know if they went with the ERJ 190?

Also, Im going to be flying in a TAM Fokker in 10 days. Yay. :(

Brazil Airline Varig Plane Is Seized In NY For Non-Payment
25 May 2006

SAO PAULO (Dow Jones)--Brazil's ailing airline Viacao Aerea Rio-Grandense (VAGV4.BR), or Varig, confirmed leasing company Bristol Associates seized a Boeing 777 in its service at JFK Airport in New York due to non-payment, a Varig spokesman confirmed Thursday.

The plane had been out of action for 43 days, awaiting maintenance, and therefore won't immediately be missed.

"Varig had not been officially notified of the repossession. Representatives of the leasing firm seized the plane on Wednesday after presenting themselves to authorities as the owner of the aircraft," said a Varig spokesman.

Varig has been in trouble for several years amid mounting debts that total about BRL8 billion. The company sought bankruptcy protection in July 2005.

The airline recently had to ground planes and cancel flights because it couldn't meet operating payments, such as airport fees and fuel bills.

A number of leasing firms have sought to reclaim planes because of non-payment through the New York courts, and other leasing firms are expected to do so in coming days.

At present, the New York bankruptcy court judging the case has not authorized repossession in order to allow Varig time to restructure.

Varig administrators plan to try to sell off the airline's operations at an auction slated for July 1.

Under the terms of the auction, Varig's domestic and international operating assets will be put up for sale for a minimum price of $860 million. The commercial wing of the company won't be sold and will be left with the company's debts.

Alternatively, the company's domestic assets could be sold, with a minimum price of $700 million.

Varig remains Brazil's leading airline on international routes, but has fallen behind TAM and Gol domestically as cash-flow considerations have forced it to reduce operations.

Auction of bankrupt Brazilian airline Varig postponed
By MICHAEL ASTOR
2 June 2006

RIO DE JANEIRO, Brazil (AP) - A bankruptcy court judge has postponed Monday's scheduled auction of Brazil's debt-ridden flagship airline Viacao Aerea Rio-Grandense, or Varig, the company said Friday.

The auction was rescheduled at the request of potential buyers, Varig said in a statement.

Eleven companies, including Portugal's TAP, were expected to bid for the planes, routes and offices of Varig, which has been under bankruptcy protection since July 2005.

The company is saddled with debts estimated at US$3.5 billion (euro2.7 billion), and under the rules of the auction it was not clear whether the buyer would be free from that debt.

"I was expecting this, because in truth the model proposed for the auction leaves a lot of things unclear," said Ameriles Romano, an economic analyst at Tendencias Consultores in Sao Paulo.

Several Brazilian carriers, including TAM, Gol Linhas Aereas Inteligentes, BRA, Webjet and OceanAir, had picked up the tender document giving them the right to bid, Varig said.

Varig's domestic and international operating assets will be put up for sale for a minimum US$860 million (euro670 million). If that minimum bid is not met, the company's domestic assets could be sold, for at least US$700 million (euro550 million).

The proceeds would be used to pay debts on operating expenses to allow the airline to continue flying.

Varig remains Brazil's leading airline on international routes, but has fallen behind TAM and Gol domestically as cash-flow problems have forced it to reduce operations.

The auction, originally scheduled for July, was moved ahead because the airline was in danger of shutting down.

Brazil's Varig airline headed for the auction block
By MICHAEL ASTOR
7 June 2006

RIO DE JANEIRO, Brazil (AP) - Six companies were expected to bid at an auction for Brazil's embattled flagship airline on Thursday, despite uncertainty over whether the new owner would be saddled with the carrier's debt.

The auction of Viacao Aerea Rio-Grandense, or Varig, had been scheduled for Monday but was postponed at the request of bidders uncertain about conditions of the sale under Brazil's new bankruptcy law.

Judge Luiz Roberto Ayoub, who is overseeing the airlines' restructuring under bankruptcy protection declared in July 2003, said Tuesday that the new owner was not at risk of assuming all or part of the company's estimated US$3.5 billion (euro2.7 billion) in debt.

But many lawyers said the law was unclear, and only six bidders indicated interest in the carrier, down from 11 last week.

"We have good expectations for the auction even though the company is broke," said Edson Hydalgo Jr., a trader at the Sao Paulo-based Intra brokerage. "What the market is looking at is if the buyer is ready to clean up the company and invest in aviation."

Hydalgo said despite the failure of several big Brazilian carriers over the past decade, it is still possible to make money in Brazil's aviation sector.

"It's not all bad, there are airlines like Gol that are working and making money," he added, referring to one of Brazil's new low-cost airlines modeled after U.S. carriers, like JetBlue.

Several Brazilian carriers, including TAM, Gol Linhas Aereas Inteligentes, BRA, Webjet and OceanAir, had picked up documents allowing them to bid, Varig said.

Varig's domestic and international operating assets will be put up for sale for a minimum of US$860 million (euro670 million). If that bid is not met, the company's domestic assets could be sold, for at least US$700 million (euro550 million).

Under Brazil's new bankruptcy law, if the airline is not sold Thursday it will be liquidated.

The proceeds would be used to pay debts on operating expenses to allow the airline to continue flying.

Varig remains Brazil's leading airline on international routes, but has fallen behind TAM and Gol due to financial problems.

From: http://au.news.yahoo.com/060608/19/zar8.html
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Friday June 9, 03:31 AM
Bankrupt Brazilian airline Varig fails to sell at auction

RIO DE JANEIRO (AFP) - Brazil's bankrupt flagship carrier Varig failed to sell at auction, attracting a single offer that was half the lowest asking price.
The failure to sell the assets of what was once Brazil's top airline could force liquidation.

The sole bid came from a group representing Varig employees, which offered the equivalent of 449 million dollars for the financially-strapped airline's international and domestic routes and 52 aircraft.

The minimum bid price was set at 860 million dollars.

Bankruptcy Judge Luiz Roberto Ayoub said he would study the bid in the next 24 hours, before deciding whether to accept it.

In a first round of bidding, there were no offers that met the minimum price of 860 million dollars.

A second round of bidding, for the airline's domestic routes and 30 aircraft at a minimum price of 700 million dollars, also failed.

When the auctioneers offered to sell the company to the highest bidder, the employees group, Participacoes, stepped forward with its cut-rate bid for all of Varig's assets, Varig Operacional.

Unions representing the airline's 10,600 employees and Varig's major creditors have warned they would take legal action if the company's purchase price is too low.

Judge Ayoub has 24 hours to decide whether the price is fair. If he accepts it, Participacoes must deposit 75 million dollars within three days to put the sale on track.

Varig is saddled with debt of more than three billion dollars and has been operating under bankruptcy protection for a year.

Sixty-five percent of that debt is owed to public services like airports authority Infraero and fuel distributor BR Distribuidor, and the company has more than one billion dollars in unpaid taxes.

Varig Operacional would be sold debt-free, its debt assumed by a company called Varig Relacionamiento.

The beleagured airline recently has failed to honor contracts on leased aircraft, which make up 80 percent of its fleet.

Four potential buyers had submitted sealed bids for Thursday's auction, according to sources close to the matter.

By late Wednesday, six bidders had paid fees to have access to all the data of the failed airline.

The six potential bidders were Gollinhas Aereas Inteligentes (GOL); TAM; TAP-Portugal; OceanAir; Aero-Lob, formed by TAP and Brazilian investors from Macau; global booking company Amadeus; and Canadian investment fund Brookefield, according to media reports.

Founded in 1927, Varig, or Viacao Aerea Rio-Granadense, became the face of Brazil in the skies in the 1970s when it won a monopoly on international flights.

Its 111 agencies worldwide became virtual embassies for Brazilian travelers and international sales represented 70 percent of revenue.

But Varig hit turbulence in the 1980s. The government froze airfares between 1986 and 1991 to combat runaway inflation. The airline has taken court action to seek compensation for the estimated two billion dollars in losses generated by that policy decision.

Varig was Brazil's leading domestic carrier until it was overtaken more than two years ago by TAM. Last year it lost its second-place ranking to low-cost competitor Gol.

Varig now has only a 16.7 percent share of the domestic market but remains the leading Brazilian carrier on the international market, with a 66.4 percent share.

From: http://www.canada.com/nationalpost/financialpost/story.html?id=18ea2983-bb96-45d8-b321-d1ac169cd3ee
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Brazil's Varig asks ACE for bailout
Seeks financial partners

Chris Sorensen, Financial Post
Published: Wednesday, June 14, 2006
Air Canada parent ACE Aviation Holdings Inc. has been asked to help bail out Brazilian airline Varig SA, a debt-ridden Star Alliance partner that is facing bankruptcy.
Sources familiar with the situation told the Financial Post Air Canada's parent was recently contacted by Brazil's biggest carrier, which is trying to secure financial partners to help lift it out of bankruptcy proceedings.
"They have been approached," confirmed one source, who added Air Canada has a reputation for investing in troubled airlines and is therefore an "obvious phone call."
The fact that Varig, which has been under bankruptcy protection for over a year, is a member of the Star Alliance group of airlines, of which Air Canada is a founding member, may be among the reasons Varig sought Air Canada for financial aid, the source said.
Media in Brazil have reported representatives from Air Canada, a U.S. investment fund and TAP Portugal, another Star Alliance member, met earlier this week at Varig's headquarters, fuelling speculation the group may be preparing a bid.
An Air Canada spokesman said the airline's parent routinely looks at airline investments, but does not comment on specific situations.
Varig, which has seen its business suffer amid rising costs and increased competition from low-cost carriers, said yesterday it had received an offer of US$450-million from an unidentified "Brazilian airline industry investor," according to Bloomberg. That tops a single previous bid of US$449-million made by a group of the company's employees during an auction. Both bids are well below a minimum price of $860-million set by the Brazilian court handling Varig's bankruptcy proceedings.
It would not be the first time members of the Star Alliance have moved to bail out one of their own. One observer, who did not want his name used, noted Germany's Lufthansa and United Airlines agreed to undertakings worth hundreds of millions of dollars to help Air Canada fend off a hostile takeover attempt from Onex Corp. in 1999.
"It might make sense to save the carrier just to maintain the Star Alliance network," said Horst Hueniken, an analyst at Westwind Partners. He added ACE chief executive Robert Milton has expressed interest in investing in troubled airlines or purchasing their assets during bankruptcy proceedings, providing there is little risk to Air Canada.
ACE invested US$75-million in US Airways last year as that carrier was struggling to exit bankruptcy proceedings through a merger with America West Airlines. The value of the investment has since tripled. Air Canada also profited from a decision in 1992 to buy a 20% stake in Continental Airlines Inc. while it was undergoing Chapter 11 proceedings.

Landing gear breaks on jet flown by Brazil's troubled Varig airline
By ALAN CLENDENNING
16 June 2006

SAO PAULO, Brazil (AP) - The landing gear on a Varig airlines jet broke as it touched down in Brazil's capital, but the plane landed safely, the airline said.

None of the 108 passengers was injured, Brazil's flagship airline, which is in the midst of bankruptcy proceedings, said in a statement. But Friday's incident prompted officials to close the airport for nearly two hours, and other flights were diverted to another city.

The MD-11 jet was headed from Rio de Janeiro to the Amazon jungle city of Manaus, with a stopover in Brasilia, 850 kilometers (530 miles) north of Sao Paulo.

Varig, or Viacao Aerea Rio-Grandense SA, said it was examining the defective part, which was scheduled for maintenance in 2009.

The airline, teetering financially for years, is faced with huge questions about whether it will survive or be broken up in liquidation. It owes about US$3.5 billion (€2.75 billion) and its domestic market share has plunged in Latin America's largest country.

Varig has recently been canceling up to about 20 flights daily as the bankruptcy proceedings drag on, though it has said the cancelations are due to bad weather and regular plane maintenance.

On Friday, the airline canceled 30 flights, according to Brazil's official Agencia Brasil news agency. All passengers were being placed on flights by other airlines, but customers said the disruptions were making travel difficult.

Argentine passenger Henrique Gutierrez was repeatedly told before heading to Sao Paulo's international airport that his flight to Buenos Aires would leave as scheduled. When he arrived, he found out it had been canceled.

"They told us everything was fine," Gutierrez told the Brazil's Agencia Estado news agency. "They lied."

An investment group led by Varig workers last week bid US$449 million (€353 million) to take over the domestic and international operations of the 79-year-old airline.

A bankruptcy court judge on Wednesday postponed a final decision on Varig's future to study the possibility of new investors joining the workers' group, reportedly including Portugal's state-owned TAP Portugal SA airline.

Varig flies daily to 36 Brazilian and to 21 foreign destinations.

Varig's future far from certain a day after Brazil judge approves sale
By MICHAEL ASTOR
20 June 2006

RIO DE JANEIRO, Brazil (AP) - Brazil's embattled flagship airline Varig canceled 67 of its 180 daily flights Tuesday and aviation authorities prepared to distribute the carrier's routes to other airlines, a day after a bankruptcy court approved the carrier's sale to a workers' group.

Judge Luiz Roberto Ayoub's decision Monday night to approve the sale of Viacao Aerea Rio-Grandense, or Varig, to the TGV consortium saved the company from immediate liquidation. But the airline's future seemed far from certain.

Local media reported the group was appealing to Brazil's National Development Bank for a $75 million loan to cover the first deposit required for the sale.

If TGV does not make the deposit by Friday, the bankruptcy auction will be declared void, the judge said in a statement.

According to the Estado news agency, representatives from TGV were meeting with the National Development Bank Tuesday to try to arrange a bridge loan, claiming their investors might not have enough time to convert their assets into cash by the Friday deadline.

TGV has claimed to have the backing of several large investors ever since it made the only bid for Varig at a June 8 bankruptcy auction, but has so far declined to name them.

Meanwhile Tuesday, Brazil's national airport authority said it would begin demanding Varig pay its airport fees in cash daily, and the country's civil aviation authorities were meeting with other airlines to divide up Varig's routes should the carrier cease to fly.

Varig had been selected as the official airline of Brazil's World Cup team, and aviation officials said they were making provisions to bring players and fans back from the tournament in Germany on other carriers should Varig be forced to halt service.

In recent days, judges in New York have ordered Varig to return 16 planes to creditors.

Varig has been in financial trouble for several years amid mounting debt of some $3.5 billion. It has been under protection from its creditors since June 2005, when it became one of the first companies to use Brazil's new bankruptcy law, similar to U.S. Chapter 11 proceedings.

From: http://news.bbc.co.uk/1/hi/business/5101002.stm
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Last Updated: Wednesday, 21 June 2006, 05:50 GMT 06:50 UK
Brazilian airline cancels flights

Rival airlines are already discussing how to share out Varig's routes
The embattled Brazilian airline Varig has been forced to cancel 67 of its 180 daily flights amid mounting fears of financial collapse.
The move came just a day after a bankruptcy judge agreed to sell the airline to a consortium of Varig workers and two foreign investors.

This saved Varig from immediate liquidation, but the consortium must now find $75m (£40m) by Friday.

The judge has warned that without this first payment the buyout will fail.

The NV Participacoes, which represents Varig workers and two foreign investors, has agreed to pay $449m for the struggling airline.

Reports in the Brazilian media say it is appealing to Brazil's National Development Bank for a loan to cover the first deposit required for the sale.

Brazil's national airport authority has said it will begin demanding that Varig pays its airport fees every day, in cash.

The news came as the country's civil aviation authorities met other airlines to divide up Varig's routes should it cease to fly.

Increased competition

Varig has been under bankruptcy protection for a year.

It was the top airline in Brazil until 2004, but was then overtaken by TAM and later by Gol.

The airline has suffered years of financial problems because of rising costs and growing low-cost competition.

It now has just 16.7% of the domestic market, but remains the leading Brazilian carrier internationally, with a 66.4% share.

June 21 (Bloomberg) -- Varig, the Brazilian airline that has operated in bankruptcy for a year, suspended flights to 10 international destinations including New York, Los Angeles and Madrid, after U.S. courts forced it to ground planes.

Porto Alegre, Brazil-based Varig, the country's biggest international carrier, said in a statement that it will continue service to some cities abroad such as Miami, Frankfurt, London, Buenos Aires, Lima, Santiago and Caracas.

A Varig union official said the company may have to end all service as early as today should a New York bankruptcy court order it to ground more aircraft. New York Bankruptcy Judge Robert Drain in New York is scheduled to rule today on a petition by Varig to extend an order that blocks leasing companies from seizing as many as 25 of Varig's planes.

``Throughout airports, employees feel like they're at a funeral,'' Selma Balbino, president of Brazil's ground workers union, said in a telephone interview from Rio de Janeiro. ''The situation is so critical that they may stop flying today, depending on the U.S. court decision.''

Varig is operating only 25 aircraft out of a fleet of 60, Marcio Marsillac, a representative of the airline's employee group trying to buy the airline, said yesterday. Sixteen aircraft are grounded because of lack of parts and another 20 were taken out of service to comply with U.S. court orders to return them to leasing companies, he said.

A Varig spokesman in Rio de Janeiro declined to comment. The airline's statement said service was cut also to Paris, Mexico City, Milan, Munich, Asuncion, Montevideo and Bogota.

http://quote.bloomberg.com/apps/news?pid=10000086&sid=aCdXaQSb.tYY&refer=news_index


The article doesnt mention all destinations, such as Cancun and Johanesburg. In fact, according to their website, I can still fly to South Africa if I please

3 de Julho de 2006 Varig
RG 7390 OP
Guarulhos Int'l (GRU), São Paulo, São Paulo, Brasil
Terminal 2 17:30

Johannesburg Int'l (JNB), Johannesburg, África do Sul
Terminal A 07:00
+ 1 dia(s)
Sem escalas
342 8:30 Econômica promocional


Incidently, anyone know if theyre the only airline in the americas to fly to south africa?

Aerolineas Argentinas Inks 5%-20% Govt Stake Deal-Report
21 June 2006

BUENOS AIRES (Dow Jones)--Aerolineas Argentinas officials inked a letter of intent with Argentine government officials Wednesday that includes an increase in the state's stake in the flagship air carrier to between 5% and 20%, state news agency Telam reported.

The letter was signed in Madrid by Argentine Planning Minister Julio De Vido, Economy Minister Felisa Miceli, and Horacio Fargosi, the president of Aerolineas Argentinas' Spain-based holding company, Telam reported. The expected signing came during an official visit to Spain by Argentine President Nestor Kirchner.

Airline officials in Buenos Aires were not immediately available for comment.

The new deal also gives the Argentine government a so-called golden share in the carrier with at least two seats on Aerolineas' board of directors. In exchange for the increased state role, the Argentine government is expected to authorize a fare increase and provide subsidies for unprofitable routes, but not a cash payment.

Before the new arrangement, the Argentine government held a 1.4% stake in the carrier. Workers control 0.4% and the remaining 98.2% is owned by Interinvest, a holding of the Spain-based Marsans travel group.

Negotiations between the Kirchner administration and the airline apparently picked up after the carrier inked a labor agreement with striking pilots and mechanics unions last month that awarded them a 19% pay raise.

The new arrangement follows a recent shuffling of key leadership positions at Aerolineas Argentinas that was linked to the talks. Among changes, Aerolineas Argentinas's Spanish President Antonio Mata and high-profile spokesman Julio Scaramella took on lower-profile positions.

Brazil court cancels Varig sale after deposit missed

RIO DE JANEIRO, June 23, 2006 (AFP) - A Brazilian court Friday canceled the sale of bankrupt airline Varig to an employees group after it failed to make a deposit on time, and delayed a decision on the carrier's fate until next week.

The sale to NV Participacoes, a consortium of Varig employees and unidentified investors, "was invalid because of the failure to pay" a 75-million-dollar deposit, the court of Rio de Janeiro announced in a statement.

"The future of Varig will be resolved next week," it said.

The court outlined its three options: organize a new auction, call for a meeting of creditors or declare the liquidation of the airline at the request of some creditors.

The announcement came minutes after NV Participacoes said it could not pay the deposit.

"We have not made the deposit. We have not been able to reach an agreement with the investors so that they deposit the money," said Marcio Marsillac, an official of NV Participacoes, which made a 449-million-dollar offer to buy the heavily indebted airline.

"We don't know what will happen. It is up to the judge to decide now."

Bankruptcy judge Luiz Roberto Ayoub is overseeing the company which has been operating under bankruptcy protection since June 2005.

On Monday he had approved Varig's sale to NV Participacoes for 449 million dollars, far below the minimum offer of 860 million dollars set at a June 8 auction.

No one had been willing to bid at the minimum price, and so the judge opened the floor for any offer.

He had given NV Participacoes until 4:00 pm (1900 GMT) Friday to make the deposit.

The 75-million-dollar down payment was to have secured the purchase of the "operational" Varig, an entity comprising all the airline's assets, its domestic and international routes and a 52-plane fleet.

Ayoub confirmed Friday news reports of another takeover offer for Varig, from Varig Log, the carrier's former freight subsidiary which was sold in 2005 to the consortium Volo Brasil, grouping US investment fund Matlin Patterson and Brazilian investors.

Varig Log reportedly offered some 500 million dollars for Varig -- 100 million more than it offered two months ago.

Like the two previous days, about two-thirds of Varig's flights were cancelled Friday, leaving thousands of passengers stranded in airports in Brazil and abroad.

It was in danger of running out of jet fuel for lack of payment. Infraero, the state airports authority, threatened to demand cash for its unpaid airport taxes.

The former leading Brazilian airline can no longer pay its suppliers or its 10,600 employees.

The cash-strapped airline is saddled with more than three billion dollars in debt and deteriorating rapidly. It only has 19 planes in operation compared with 46 in early June.

The National Civil Aviation Agency has launched an emergency plan to deal with the crisis: 28,000 passengers holding Varig tickets are supposed to return to Brazil between now and June 30, including 5,600 attending the World Cup in Germany.

The agency claims to have found seats for the passengers on other airlines, but late Thursday dozens of Brazilians stranded in New York were still waiting for a flight home.

Two army aircraft will repatriate Brazilians if necessary, the agency said.

Once Brazil's indisputable leading airline, Varig's fortunes began to decline in the 1990s after it lost its monopoly on international routes. The last time Varig turned a profit was in 1995.

Brazil Aviation Officials OK Varig Sale
By ALAN CLENDENNING
24 June 2006

SAO PAULO, Brazil (AP) - Brazilian aviation authorities approved the sale of the cargo unit of the country's bankrupt flagship Varig airline, opening a window Saturday for the salvation of the carrier and an end to chaos for stranded ticket holders.

The company Volo de Brasil announced its intention to buy the VarigLog cargo unit earlier this year but the sale was held up by claims that Volo is controlled by foreign investors. Foreigners are allowed to own only 20 percent of Brazilian airlines.

Volo, which says its majority owners are Brazilian, offered $500 million for all of Varig on Friday. Allowing it to buy the cargo unit means Brazil's government does not have a problem with Volo's ownership structure. That suggests that Volo also would be in a good position to buy all of the country's largest international airline.

Judge Luiz Roberto Ayoub has final say over the airline's restructuring and was analyzing the Volo proposal over the weekend to determine its viability.

He told Brazil's CBN radio Saturday that approval of VarigLog's sale to Volo removed one of the biggest hurdles the firm faced in trying to buy Varig.

The 79-year-old company -- a source of pride for Brazil and renowned until recently for stellar service -- seemed on the verge of collapse this week after canceling hundreds of flights and suspending dozens of international and domestic routes.

The airline has run short of money to pay for fuel, with planes grounded amid demands by leasing companies for overdue payments.

In Germany, Brazilian soccer fans who flew into Paris; Milan, Italy; and Munich, Germany, found out that the company had suspended service to those destinations, and they were instructed to try to get home through Frankfurt, one of the few European destinations now served by Varig, the Agencia Estado news wire service said.

Paying their own way over land, they were put on long waiting lists for seats.

The government estimated earlier this week that 28,000 people were overseas and scheduled to return by June 30.

Brazil's air force said five planes would be available if the government is forced to rescue stranded passengers.

The judge indicated the entry of Volo as a new suitor for the entire company means that another auction will probably have to be held to give other investors a chance to bid.

The proposal also will be reviewed by Varig's creditors and Ayoub said he will not consider liquidating the company unless they ask him to.

On Friday, the judge rejected a $449 million bid for Varig from a workers group that failed to come up with a $75 million down payment, the authority said in a statement.

Varig has routes throughout Latin America and to Europe and the United States. Many passengers did manage to get on flights Friday despite the carrier's cancellations, but said they faced delays ranging from hours to days.

The airline has been under protection from its creditors since June 2005, and its domestic share of the market in Latin America's largest country slumped in recent years as its financial problems worsened.

Before heading into bankruptcy, Varig repeatedly appealed for a government bailout, but top Brazilian officials said they wanted a free-market solution.

Thats good news, it would be sad to see Varig die. Incidently, I was in Guarulhos yesterday and noticed one of he few Varig flights was Sao Paulo-Bogotá-Mexico City. I thought Varig had cancelled Mexico flights? And id never heard of this route before, is Varig trying to join some routes together to get passengers to their destination? All flights to the US were cancelled.

Brazil's TAM carrier to purchase 37 more Airbus jets as Varig's troubles deepen
By ALAN CLENDENNING
28 June 2006

SAO PAULO, Brazil (AP) - Brazil's TAM airline announced plans Wednesday to buy 37 more Airbus jets to meet increasing domestic and international demand, just as the country's flagship Varig carrier seems poised to collapse.

TAM Linhas Aereas SA's "memorandum of understanding" for the purchase calls for delivery by 2010 of 15 Airbus 319s, 16 Airbus 320s and six Airbus 330s, chief executive Marco Antonio Bologna said.

The value of the deal wasn't released, but comes on top of firm orders by TAM for the purchase of 29 Airbuses with options to buy 20 more.

If all the planes end up being purchased, it would dramatically boost the size of TAM's fleet, which currently stands at 64 Airbuses and 20 Fokker-100s. Some of the new jets will be used to replace the Fokkers, which don't carry as many passengers as the Airbus models.

"The increased air traffic density justifies our choice of larger planes," Bologna said.

TAM plans to have a fleet of 96 planes by the end of this year, and the fleet would grow to 127 jets by 2010, the company said.

Bologna didn't mention it, but TAM is expected to benefit if the bankrupt Varig ends up getting broken up in court proceedings that have dragged on for months, prompting mass flight cancelations over the last week.

Even if Varig is saved by a last minute offer to buy it by Volo do Brasil, TAM would probably still benefit because Varig would likely survive only as a smaller carrier.

TAM is the largest Brazilian airline for domestic flights. While Varig is the biggest international carrier, TAM has been gaining ground internationally.

It already flies to Miami, New York City and Paris. The airline plans to launch service to London soon, and will add more flights in Brazil and to other South American destinations.

Varig, short for Viacao Aerea Rio-Grandense SA, canceled 199 of its 291 flights scheduled to leave Wednesday, according to Brazil's Civil Aviation Authority.

A Rio de Janeiro bankruptcy judge is expected to decide this week whether to hold an auction for the airline to consider Volo's US$500 million (€398 million) bid. He has said he will not move to liquidate the company unless creditors make that request.

Varig is burdened by US$3.5 billion (€2.78 billion) in debt, much of it to Brazil's government, pension funds and the country's state-owned petroleum company.

Thousands of Varig passengers have been facing travel nightmares for a week, facing delays of hours to days as they try to use their tickets to get on flights operated by other carriers.

The airline is having trouble paying for landing and departure fees and fuel for its jets, and some jets are grounded amid demands by plane leasing companies for payment of overdue bills.

Brazilian bankruptcy court wants Varig re-auction on July 12

RIO DE JANEIRO, July 3, 2006 (AFP) - A Brazilian bankruptcy judge has proposed a re-auction of ailing airline Varig on July 12, for an offer of 490 million dollars, the Rio de Janeiro court said Monday.

The judge, Roberto Ayoub, called a July 10 meeting of Varig's creditors to consider the offer and, if it is accepted, the company will be auctioned two days later, the court said.

Varig has been operating under bankruptcy protection since June 2005. According to the bankruptcy law, a direct sale of the company is prohibited and any takeover must be conducted by auction.

The US-Brazilian consortium Volo do Brasil, grouping US investment fund Matlin Patterson and Brazilian investors, offered 490 million dollars for Varig a week ago, after Ayoub cancelled its sale to a group of Varig's employees.

The employees group had placed the only acceptable bid at a June 8 auction. But Ayoub annulled the sale when the bidder was unable to make a 75-million-dollar deposit on time.

Volo do Brasil also deposited 20 million dollars with the court which kept the carrier flying, although more than half its flights were cancelled.

The airline, Brazil's biggest international carrier, is saddled with more than three billion dollars in debt and is on the brink of collapse.

Volo do Brasil wants to buy Varig free of debt and says it has all the financing necessary to run the airline and complete its restructuring.

Volo do Brasil wants Varig's brand, its domestic and international routes and its fleet of airplanes. The airline's three-billion-dollar debt would be assumed by Varig-Relacionamiento, a company that will retain several services, including airport services.

The US-Brazilian consortium bought Varig's freight subsidiary VarigLog in December 2005.

At the failed auction on June 8, Varig's routes and 52 aircraft were offered for sale at a minimum price of 860 million dollars.

Once Brazil's indisputable leading airline, Varig's fortunes began to decline in the 1990s after it lost its monopoly on international routes. The last time Varig turned a profit was in 1995.

Varig still controls 60 percent of flights outside of Brazil, flying passengers to a total of 21 foreign destinations. But rivals Tam and Gol have now left Varig with only 16 percent of the domestic market.

Brazil TAM, Gol Airlines Boost Operations On Varig Crisis
5 July 2006

SAO PAULO (Dow Jones)--Amid a major crisis for traditional but now debt-laden flag carrier Viacao Aerea Rio-Grandense (VAGV4.BR), or Varig, two other Brazilian airlines, TAM (TAMM4.BR) and Gol Linhas Aereas Inteligentes (GOL), are sytematically expanding their operations.

Late Tuesday, TAM announced seven new flights, including two international routes, one to Assuncion, the capital of Paraguay, and another to Buenos Aires, the capital of Argentina. The announcement came less than a week after Tam signed a memorandum of understanding to buy 37 airplanes from Airbus (ABI.YY).

On Monday, no-frills carrier Gol announced two new flights to Argentina. In June, the International Finance Corp., the private-sector arm of the World Bank, authorized a $50 million corporate loan for GOL to finance expansion.

TAM and Gol are taking advantage of the crisis affecting Varig, and are increasing their operations to meet rising passenger demand for both domestic and international flights, market analysts said.

"It is more than clear now that both companies want to fill in the gaps left by Varig," said an industry analyst at a local bank. The analyst asked not to be named. "Even if Varig avoids liquidation, the company will operate at a much lower profile than in the past, so TAM and Gol are anticipating that scenario."

Varig, once the largest carrier in the nation, has been struggling for several years under the weight of an 8 billion real ($3.65 billion) debt load. It has been operating under Brazilian bankruptcy law protection since July 2005.

Varig's position has crumbled because of a lack of funding for basic expenses. More than half the company's fleet is grounded, with a majority of its daily flights canceled.

In May, Varig saw its market share slip to 14% compared with 27% last year, according to monthly figures published by Brazil's National Civil Aviation Agency, or Anac. By comparison, in August 2001, before the terrorist attacks in the U.S., Varig had a market share of 42.8%

On Monday, a Brazilian civil judge set July 12 as the date for a new auction in the bankruptcy proceedings. Officially, there is only one proposal so far for Varig. Totaling some $500 million, the proposal was made by Varig's former cargo unit, VarigLog. According to local press reports, another investment group may also attempt to cobble together a consortium in time for the auction.

TAM and Gol have seen a continued increase in market share. According to Anac figures, in May, TAM accounted for 46% of all domestic passenger kilometers flown, up from 43% last year, while Gol increased its market share to 34% from 27% in May 2005.

On Wednesday, UBS raised its share price targets for TAM and Gol, citing favorable fundaments. "We believe Varig's ongoing struggles will continue to allow both companies to achieve higher than originally forecasted load factors, even as we take into account ever more aggressive fleet rollout plans," UBS said.

UBS raised its share price target for TAM to 102.00 Brazilian reals ($46.74) from the previous BRL80.00. For GOL, the investment house hiked its target price to BRL103.00 from BRL95.00.

As of 1345 GMT, TAM shares were down 2.3% at BRL59.60, while Gol shares were falling 1.43%, quoted at BRL76.00. By comparison, the main stock index, the Ibovespa, was down 1.93%.

From: http://www.boston.com/business/globe/articles/2006/07/05/second_bidder_may_make_pitch_for_brazilian_airline/
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Second bidder may make pitch for Brazilian airline
By Associated Press | July 5, 2006
RIO DE JANEIRO -- A second group was considering bidding for Brazil's embattled flagship airline Varig, local media reported yesterday, a day after a judge set the date for a new bankruptcy auction.

On Monday, Judge Luiz Roberto Ayoub said a new auction would be held on July 12, assuming creditors approved a $500 million offer from Volo do Brasil, the investment group that purchased Varig's cargo unit VarigLog.
If creditors approve the offer at a July 10 meeting, the company would be sold at auction two days later.
Under Brazilian law, the sale must take place through public auction even though there appeared to be only one interested party.
But yesterday the Estado news agency reported a second group led by Roberto Lima Netto, the former president of Brazilian steel maker Companhia Siderurgica Nacional, was studying whether to make a $600 million bid for the carrier.
The bid would be made in a joint proposal with U S -based consultancy Cinzel Partners, according to Estado.
If a second group does bid they will have to compensate Volo do Brasil for covering Varig's airport fees and fuel costs in recent days in order to keep the airline flying, Ayoub said earlier.
But even with the cash infusion from Volo do Brasil, Varig has been forced to cancel more than half of its flights in Brazil and abroad.

Brazil's Varig airline receives new bid, could face new auction
11 July 2006

SAO PAULO, Brazil (AP) - A Brazilian investment group has offered US$500 million (euro393 million) for the country's struggling flagship airline Varig, and it could go to auction next week, the company said Tuesday.

A bankruptcy judge will put the proposal from Volo do Brasil to creditors of the indebted Viacao Aerea Rio-Grandense SA airline on July 17, Varig spokesman Paulo Cesar said in Rio de Janeiro.

"Assuming they accept it, we'll have a new auction on July 18," he said.

Judges at a Rio de Janeiro bankruptcy court met for seven hours Monday before voting to accept the bid from Volo do Brasil, which recently purchased Varig's cargo unit VarigLog.

If creditors accept the offer -- currently the only one -- Varig will be put up for auction to allow other bidders a chance to take over the company.

The minimum asking price will be 52.8 million Brazilian reals (US$24 million;euro19 million), which will be passed on to creditor