Varig and Tam to merge?

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Brazil's top two airlines, Varig and Tam, may merge as they seek to reduce heavy debts and survive the tough trading environment

The board of Varig resigned last month and the company had one of its aircraft seized in Paris last week after it failed to keep up lease payments.

If a merger goes ahead, it would have over 200 aircraft and revenues of around $4bn a year.

Tam president Daniell Mandelli said a merger was likely but added that a new holding company could oversee both carriers.

The companies were also confident that the move could overcome competition concerns.

Details of how the move would affect Inflight Sales Group's duty-free contract at Varig are unclear at this stage.