Star Alliance Kicks Brazil’s Varig Out

Varig, Brazil’s former flagship carrier, has been forced to leave the Star Alliance, in a move that could leave the world’s largest airline grouping without a Latin American partner for 18 months or more.

The Brazilian carrier has shrunk after coming close to collapse and being sold to new owners earlier this year. Star said the revived carrier could apply to become a member in the future.

"We are looking once again at securing a Latin American partner in the alliance," said a Star official. He said new applications typically take 12 to 18 months to process.

Star, which is led by Lufthansa, United Airlines and All Nippon Airways, will have 20 members following Varig’s departure at the end of January, and did not comment immediately on whether it would seek a replacement in one of the world’s fastest-growing aviation markets.

Its lead members and TAP Air Portugal have extensive networks to the region, but the absence of a local presence could leave it at a disadvantage to oneworld, the rival grouping led by American Airlines and British Airways, which counts Chile’s LAN among its members.

The airline industry is now dominated by three alliances – Star, oneworld and SkyTeam – which were created to extend the route networks of their members and provide cost and revenue benefits through joint marketing and purchasing.

Analysts said Varig’s ejection reflected the pressure on alliances to provide consistent standards of service and operation in their pursuit of "seamless" travel options for passengers.

However, the alliance system is under strain as partners restructure and expand into one another’s territory. Aer Lingus left oneworld earlier this year, and the equity swap between Air China and Cathay Pacific – which are in rival alliances – has led to speculation that the Asian carriers will have to choose a single grouping.

Varig once dominated Brazil’s airline industry, but long-running financial problems saw it auctioned to a group of local and US investors earlier this year.

The "new" Varig secured its operating license earlier this month, but now operates 15 aircraft on just 13 domestic routes and four international sectors, though has plans to double its fleet.

Most of its routes have been taken over by Tam and Gol, two fast-growing low-cost carriers. Tam now operates flights to Europe and the US and BRA, a new entrant, has launched services to Europe. (FT)

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