Paul Lewis/WASHINGTON Brian Homewood/RIO DE JANEIRO
Varig Brazil has announced cuts in international services to the USA and Europe and plans to withdraw its fleet of McDonnell Douglas DC-10-30 passenger aircraft by the end of the year as a massive Brazilian currency devaluation begins to affect airline traffic.
Brazil's embattled real has lost some 35- 40% of its value since the start of the year as a result of a government devaluation and market run on the currency. This and increased competition from US carriers has started to undermine Varig's traffic, particularly to the USA, of which close to 80% originates in Brazil.
"There is a tremendous imbalance in the market between Brazil and the USA. Traffic remained good during the high season of January and February, but we're taking action because of a trend we're seeing developing. Advance bookings are off and there will be a downturn in traffic," says Varig.
As a result, the airline will "temporarily" suspend its daily DC-10 service from Rio de Janeiro to Atlanta and Washington-Dulles and the daily Orlando extension to its Miami flight from 15 April. The airline will also stop its four-weekly Boeing 767 flights to Porto in Portugal and thrice daily MD-11 service to Zurich.
Instead, Varig will rely on Star Alliance partner United Airlines to serve Washington DC, and Delta Air Lines, with which it has an interline agreement, to connect with Atlanta. Flights from Rio de Janeiro to Los Angeles will be increased from five to seven frequencies a week from 29 June. Other changes will include a "modified" schedule to the Brazilian Northeast and Amazon regions.
The cutbacks will enable the airline to advance the retirement of its four DC-10-30s. Two are leased from Citibank, one from Mitsui and one from De National Investeringbsbank of the Netherlands. Varig will retain its two DC-10-30 freighters. Brazil's currency crisis has had a major impact on the airline's lease payments. The carrier, which has debts of around $1.8 billion, leases about two-thirds of its 95 aircraft.
Source: Flight International
