TAM Linhas Aereas, Brazil's second largest airline, is scaling back its fleet, routes and workforce after a first-half loss of 223 million reais ($70.6 million), up from 197 million reais a year ago.

Like other Brazilian carriers, TAM has been suffering from the global economic slowdown and sharply increased costs, largely related to the devaluation of the Real. Lease agreements and many other operating costs are US dollar-denominated and rise as the Real falls.

TAM says it will abandon a fierce fares war with discount competitor Gol Transportes Aereos on domestic routes .

As part of its restructuring, TAM will return 21 of its 50 Fokker 100s to lessors in coming months and accelerate the replacement of the remaining Fokkers, originally slated for retirement by 2007. The aircraft suffered some bad publicity - and subsequent consumer avoidance - when two of TAM's fleet were involved in landing accidents on 30 August. One aircraft made a gear-up landing and the other an emergency put down on farmland after running out of fuel because of a punctured fuel line. There were no major injuries from either incident.

TAM has been adding Airbus A320-family aircraft to its fleet and expects to replace the Fokkers with a dozen more in the next six months. As part of the cut-back, services to seven mid-sized cities in Brazil will be eliminated, services to several more will be reduced, and 524 employees will be laid off. The restructuring will result in a 12% reduction in capacity across its network.

Source: Airline Business