São Paulo, September 18, 2003 (Agência Brasil - ABr) - On Wednesday (17), the Varig and TAM airline companies signed a contract that will make it possible to create a new airline in Brazil. The document, which the companies delivered to the Securities and Exchange Commission (CVM), at the São Paulo Stock Exchange, makes it clear that "the present contract neither effectuates nor completes the association, but it determines the obligations of both parties and the conditions of association, which, if implemented and completed, will merge all air transportation activities, with the exception of air freight operations," of Varig and TAM.

The contract was signed "irrevocably," but it contains clauses that permit the merger to be suspended, if the parties do not comply with all the items in the document. The companies established a 120 day deadline to complete the association, renewable for an additional 90 days if necessary. The companies informed that the process of negotiations leading to the merger will be analyzed by the Administrative Council for Economic Defense (Cade). The document should now be submitted for evaluation by the National Economic and Social Development Bank (BNDES). (DAS)