After one year of negotiations the two Brazilian airlines Varig and TAM have halted talks about an eventual merger although they have intensified their cooperation in commercial and operational areas.

This does not mean however that all efforts of consolidation have been abandoned, they will simply take a different direction. Given that the Brazilian competition authority, Cade, has pronounced that Brazilian law does not permit the continued joint operation of domestic flights by two independent companies, the two carriers, together with the Brazilian government, are considering the perspective of establishing a third company owned by TAM and Varig, which will possibly be granted regulatory approval.