Wednesday, March 28th 2007 - 21:00 UTC

Brazilian budget airline GOL takes over full control of Varig

Brazilian budget airline Gol announced it will buy struggling rival Varig for 275 million US dollars, (98 million cash), once Brazil's proud flag carrier.

The deal also includes taking over Varig's debt of an estimated 45 million US dollars but also includes access to its routes to the US and Europe as well as valuable slots at Sao Paolo airport. For many years Latin America's largest air carrier, Varig almost collapsed under debt last year and was operating under bankruptcy protection. It managed to re-emerge after being bought by an investment group Volo de Brasil. According to the agreement Varig and Gol would be run as separate companies, Gol said, with Varig keeping its own brand and its Smiles frequent flyer programme. It would also see its number of planes double to 34, serving Frankfurt, London, Madrid, Milan and Paris as well as US and South American destinations, it added. "With this acquisition, Brazil will maintain an important flag in global aviation, the industry will benefit from an increase in jobs and demand will be better served" said Gol's chief executive, Constantino de Oliveira Junior. He added Gol would keep its focus on its low-cost, low-fare business model, with a single class of service in the Brazilian domestic market and South America. Under the deal, Gol will also take control of the cargo business, VarigLog. Before being sold to Volo, Varig had been due to be bought by a consortium of workers at the airline. However a judge cancelled the deal after the group missed a payment. Chilean air carrier LAN, which has become Latin America's best and most profitable airline had been eyeing Varig as a possible acquisition and apparently had an option after having loaned the company 17.1 million US dollars.

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