Rio, 4/12/2006 (Agência Brasil - ABr) - the situation at Varig, Brazil's flagship air carrier, has never been as crítical as it is right now, says the coordinator of Market Studies and Regulation at the Applied Economic Research Institute (Instituto de Pesquisa Econômica Aplicada) (Ipea), Ronaldo Seroa da Motta. A definitive solution for the company's problems which will keep it from going belly up is "a long way off in the distance," he declared.

According to Motta, only a "new fact," by which he seems to be talking about some kind of a miracle, could save the company and avoid bankruptcy. "This new fact is getting more and more difficult. With each passing day the value of what remains of the company is deteriorating. With each passing day losses mount and offers to resolve the situation get less appetizing. The only effective solution is a profound change in the management of the company," he says.

Motta goes on to say that the profound change in management will inevitably mean a sharp reduction in the workforce, cutbacks in flights and a concentration of activities in a few priority sectors. The result will be a direct conflict with employees and their unions. Opportunities have been lost because the situation is so complex, he adds. There are always losers in this kind of situation. If they have political pull, which is the case at Varig, it is hard to find a viable solution, concludes Motta.

Translation: Allen Bennett