Varig still controls 79% of all international traffic carried by Brazilian airlines, but rival TAM is making inroads.
Already serving a number of South American cities, TAM extended its reach last year by boosting its Paris frequencies to double daily and launching a new route to New York. Now it is pressing Brazil’s government to renegotiate the UK bilateral and remove the single designation limit that blocks it from adding a London route.
Varig’s international market share has held up better than domestically, but even on foreign routes it lost six points in 2005. Varig might regain some of that if it is able to restore and upgrade its fleet.
But TAM is not waiting. It has entered an extensive behind and beyond gateway codeshare with Air France, and agreed to codeshare with Air Madrid on some South American routes. It has secured $86 million in credit facilities from the World Bank’s International Finance Corporation and Brazil’s national development bank. Both loans are earmarked for fleet expansion, pilot training, and European certification of its maintenance facility.
TAM is also vigilant about Varig’s restructuring and has warned it will fight any move by TAP Portugal to take over Varig routes as part of a proposed rescue plan. ■
Source: Airline Business
