With the grounding of BRA, Brazil is left with two dominant groups: TAM and Gol/Varig
The suspension of flights at BRA, sharp profit falls at both Gol and TAM in the third quarter and the return to international duty of Varig, all in the past few weeks, illustrate perfectly the fluctuating fortunes of the Brazilian airline industry.
São Paulo-based BRA, which had built up a network of around 30 destinations in under two years, suspended all of its domestic and international operations in early November. Its fleet of seven Boeing 737s and two 767s were grounded as the carrier ran out of cash. Privately owned BRA says it is in negotiations to secure enough financing to resume operations. Prior to the suspension, it emerged that the airline's founder and chief executive, Humberto Folegatti, had resigned in October. He had just ordered 20 Embraer E-195s.
BRA's predicament was deepened by air traffic disruption in the country, partly caused by flight restrictions at São Paulo's Conganhas airport following the crash of a TAM Airbus A320 in July. This disruption was mainly behind Gol's profits in the third quarter plummeting by 75% and TAM's by over a third.
On the positive side, Varig, under the new ownership of the Gol group since April, is rebuilding its network. According to Gol chief executive Constantino de Oliveira Junior, by the end of 2008 rejuvenated Varig is aiming to be operating to 14 cities in Brazil and to 13 international destinations.
Varig's international network had been reduced to a single link to Frankfurt after its collapse in the summer of 2006. Varig began flying to Paris and Rome in early October and restarted flights to London at the end of October. Services to Madrid, Santiago in Chile and the Uruguayan capital Montevideo will all start by year-end. A service to Mexico City resumed in early November while flights to Miami and New York are planned to begin in the first quarter of 2008, says de Oliveira.
It has been achieving loads of around 60% on its European routes with the strong take-up mainly down to the Varig brand, despite its problems. "It is like a football team: sometimes the team is not doing so well but people still support them," he says.
De Oliveira says Varig is expected to break even in the third quarter of 2008. Its flights feature a two-class service, both for domestic and international flights.
"We are using the Varig brand to extend a premium service, especially in the domestic market," says de Oliveira. Having both brands in the home market means the group can offer a no-frills and business product. "We think there is room for both."
Source: Airline Business
