Losing Altitude.

BRAZIL'S AIRLINE INDUSTRY CONTINUES TO LOSE ALTITUDE.

In April, one of the top four national airlines, Viac[tilde{a}]o A[acute{e}]rea S[tilde{a}]o Paulo SA, or Vasp, narrowly avoided having its airplanes seized, twice. First, the Brazilian government sought the aircraft because the airline neglected to pay service fees. Then a leasing company wanted them for missed debt payments. In both cases, the airline won reprieves.

Vasp owes a U.S. company, Golden Gate Leasing, about $US41 million. It also must pay the U.S. Federal Aviation Administration a $440,000 civil penalty for "carrying various corrosive, poisonous and flammable materials, which were not packaged, labeled and documented as hazardous."

Airline President Wagner Canhedo characterizes Vasp's setbacks as "cash-flow problems" and has promised that the airline will regain altitude.

Meanwhile, Brazil's No. 3 airline, TAM, and No. 4 carrier, Transbrasil, have signed an operational agreement to ward off losses. The airlines said in a joint statement that they would "rationalize flight frequency"--which is another way of saying they will use fewer planes and offer fewer flights than before to save money.

The recent dip in Brazilian aviation may foreshadow fewer airlines in South America's largest country. Robert Booth, president of Miami-based Aviation Management Services, thinks so. He calls recent developments "just the first steps."