Too Many Wings

Plastered over the windows of an airline ticket office in downtown Rio were defiant posters: IT IS EASY TO DESTROY, BUT IT TAKES 35 YEARS TO BUILD! WE WILL NOT DIE! The protests were against one of the most severe economic reforms yet attempted by Brazil's revolutionary government. In a special decree, President Humberto Castello Branco ordered the country's big Panair do Brasil airline to cease operations immediately, grounded its planes, and turned over its domestic and international routes to other Brazilian lines.

It was a harsh but necessary decision. Among the many things bleeding Brazil is its airline industry. In the early days, the country needed airlines to open up the remote interior. The government awarded routes to anyone with a wing and a prayer, encouraged the lines to stay aloft with subsidies, artificially low fuel prices, and special exchange rates on planes and parts. By 1953, no fewer than 20 scheduled airlines crisscrossed Brazil with a spaghetti-like network of routes. There are still six domestic carriers, including three with international routes. On some routes, as many as five lines compete for the same passengers, with the result that just about everybody loses money. The subsidies, emergency loans and other bailouts cost the Brazilian government uncounted millions each year. The worst drain was Panair, which has been losing an estimated $1,000,000 a month, and has run up a debt of $66.8 million.

Fly Now, Pay Never. Founded in 1929 by a group of New York investors and taken over the next year by the U.S.'s Pan American World Air ways, Panair was once South America's proudest and biggest airline. It pioneered the first services to the Amazon basin, expanded throughout the country, carried Brazil's flag to London, Paris, Frankfurt and Rome. As the jet age began, Panair added DC-8s and Caravelles to its fleet of Constellations and Catalinas.

Then, in 1961, bowing to the intense nationalistic pressures stirred up by President Janio Quadros, Pan American sold its 30% controlling interest to Brazilian investors. The new owners, notably Mario Simonsen, a wheeler-dealer who made a fortune speculating in coffee, quickly put Panair into a financial nose dive. To win friends and influence politicians on other business deals, Simonsen started handing out so many free tickets that on overseas runs as many as 40% of Panair's passengers were flying now and paying never.

Last week one of the line's four Caravelles was held at the factory in France for nonpayment of repair bills. More than half of Panair's 25 planes were out of service, and those still flying were often days, not just hours behind schedule. Panair's 4,500 employees were far more than the company needed, but under Brazilian law it was next to impossible to fire them.

Weak as it was, Panair was still something of a national institution, and Castello Branco's sudden action brought shocked outcries. The governor of Amazonas State declared a state of emergency and flew to Rio to try and plead with Castello Branco. Panair's directors vowed to appeal the President's order to the Supreme Court, but it does not reconvene until March 9. By then the airline will probably have been torn apart by its competitors and creditors.

Ten in Ten. Under Castello Branco's order, Panair's domestic service will go to Cruzeiro do Sul and VASP, which fly to most of the same cities anyway. The real prize, Panair's routes to Europe and the Mideast, will go to Varig, which is already South America's biggest airline and by far its best. Founded in 1927, Varig has been run for the past 23 years by Ruben Berta, 57, a onetime Lufthansa accountant who has built it into an international operation with routes to South America's west coast and the U.S., a huge domestic system, and a fleet of 95 planes, including 15 jets and propjets.

No sooner was Panair grounded than Varig moved in to pick up the pieces, loaded passengers booked on a Panair DC-8 directly onto a Varig Convair 990 for a Lisbon-Paris-Frankfurt flight. Now Berta is talking about renting two of Panair's DC-8s and assigning a new Varig Boeing 707 to the transatlantic service. It was a familiar routine for Berta & Co. Panair is the tenth Brazilian airline that Varig has swallowed in as many years.

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