Varig has dropped plans to lease two new Boeing 777s and is negotiating with the manufacturer to reschedule deliveries of other newly ordered aircraft. The airline is also planning to restructure further its ancillary operations in the face of Brazil's recent economic difficulties.

The Brazilian flag carrier has scrapped an agreement with International Lease Finance (ILFC) to take two General Electric GE90-powered 777-200IGWs in March and April next year. According to industry sources, the airline is also in discussions with Boeing to defer delivery of 24 new aircraft ordered last September.

Varig was originally to have taken delivery of four new 777s in about 2001. Another six CF6-80-powered 767-300ERS were due to enter service from this year, while the bulk of its 14 additional 737-700/800s would have followed next year and the year after. The carrier will confirm delivery of only one additional 767 this year.

The airline wants to cut its fleet from 95 to 75 aircraft. It will dispose of four McDonnell Douglas DC-10-30s and six 737-200s, which will be sold or returned to lessors. It also intends to shed another six aircraft (Flight International, 21-27 April).

"Which type, we don't yet know," says Varig president Fernando Pinto. "The programme for new deliveries is exactly the same as we give back aircraft. We've jets ending finance and operating leases at exactly the same time as we receive new ones."

The workforce has been progressively cut, by 6,000, through restructuring. This has included outsourcing Varig's information technology, reducing staff from 550 to just 30, and the sale of a 95% interest in its engine services to GE. It retains a 5% stake in the new GE Varig Engine services.

Varig's goal is to reduce its payroll to 15,500 within two months, entailing the axeing of another 2,300 positions. The carrier is working on spinning off its training and ground handling operations into new joint ventures with unidentified partners. "We're reducing to come back much stronger," says Pinto, but he remains non-committal on when a recovery might begin.

The two ILFC Boeing 777-200s originally destined for Varig are believed to be going to Continental Airlines. The carrier has taken delivery of eight of the 14 GE90-powered 777-200s on order, and has options on another 18 twinjets. Continental has refused to comment on whether it will be taking additional 777s.

Source: Flight International