Brian Homewood/RIO DE JANEIRO Varig's new president has reversed the financially-troubled carrier's previous strategy and filed a proposal to pick up a number of international routes as part of an expansion plan that also includes the launch of a low-cost carrier.

After several years of shedding routes, returning aircraft and dismissing staff, the airline has increased its fleet from 82 to 91 aircraft.

Former Embraer president Ozires daSilva, who took over from Fernando Pinto after he was ousted by shareholders in May, plans to continue the expansion. "Selling aircraft is something I used to do," Silva says.

Varig, which reported a net loss of $94 million Reals ($52 million) last year, has sent Brazil's Civil Aviation Department a proposal under which it would take over the international routes abandoned by ailing VASP over the last few years. These include routes to the USA, Canada, Spain, Japan, South Korea and Belgium.

Varig has also benefited from VASP's demise by taking on board two former VASP MD-11s leased from Tombo Aviation for its long haul services, as well as adding five Boeing 737-400s discarded by Transbrasil.

Varig has also increased its services to Los Angeles and Lima, both of which now have daily services from Rio de Janeiro/Sïo Paulo, and in June inaugurated a three-times weekly service to Munich.

The carrier has also started up Rotatur, a low-cost charter airline which will operate charter flights at night using Varig aircraft that would otherwise be lying idle. Rotatur will connect principally Rio de Janeiro and Sao Paulo with tropical destinations in the north-east and aims to compete with long-distance bus services.

The last three months have seen the airline, which is controlled by the Ruben Berta Foundation, redistribute its assets. A body known as FRB-Par Investimentos will control Varig as well as two holding companies: Varig PTA, which will be responsible for the regional carriers Nordeste and Rio Sul as well as Rotatur; and Varig PSC, which includes its Tropical Hotel chain, Sata ground and Varig Travel.

Silva, who has joined rival airline TAM in calling for the abolition of government price controls on internal air fares, is also planning a fleet renewal, with Boeing 777s to replace the fleet of MD-11s over the next few years.

But analysts here say such plans do not address Varig's biggest problem - its debts of around $750 million.

Source: Airline Business