Brazilian carrier Gol Linhas Aereas is to shut down budget airline Webjet and lay off 850 employees.
Webjet will be closed down in phases, beginning with the cessation of flight operations which are conducted by Boeing 737-300s.
Gol says the aircraft are "technologically out of date" and their fuel consumption makes them "no longer competitive".
The carrier disclosed in July 2011 that it was intending to take over Webjet. Brazilian regulator CADE approved the acquisition in October, stating that Gol would have 36% of slots at Rio de Janeiro's Santos Dumont airport following the merger.
Gol says that Webjet's passengers' flights will be "guaranteed" and that Gol will assume resonsibility for transporting them. "All the necessary measures have been taken," it adds.
Closure of Webjet and the laying-off of the flight crew, cabin crew and maintenance personnel will lead to a non-recurring cost to be included in Gol's fourth-quarter results.
All 20 of Webjet's aircraft will be returned by the end of the first half of 2013, including 16 in the first quarter. Gol says: "The measures will improve operational efficiency from 2013."
Gol expects domestic capacity will be cut by 5-8% in the first half of next year as a result of the smaller fleet.