Under pressure from CADE, Brazil's anti-trust agency, Varig and TAM have scaled back their proposed merger. Instead of a holding company owning both airlines outright, they now propose to create a jointly owned subsidiary to operate only their codeshared domestic flights. If approved, this would effectively merge only those local flights rather than all operations.
CADE forced this issue in early February when it told the airlines they could not keep codesharing indefinitely without a long-term plan. CADE approved their codeshare a year ago only as an interim step to keep Varig alive pending a full merger.
The codeshare has proven very successful. That, plus a revival in air traffic, have boosted revenue for both airlines and led to public questions about whether they should still merge, especially under the previously agreed terms. Varig and TAM drafted their new plan with CADE and the government investment bank.
Source: Airline Business
