Brazilian Giants to Merge

Brazilian Giants to Merge

In an effort to stave off bankruptcy, Brazil’s top two airlines, Varig and TAM, have signed a letter of intent to merge the two companies.

The deal is scheduled to be laid out in detail by June 30, and will be subject to government scrutiny, though few fear that antitrust issues will be a problem.

The two airlines combined racked up almost $500 million in losses in the first nine months of 2002, and are hoping that a joint effort will minimize those kinds of losses.

The impact on frequent flyers is difficult to predict at this point (though we assume that a merger would have less draconian consequences than a cessation of operations). Both the Varig Smiles and TAM’s Fidelidade programs continue to operate as normal.

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