David Zylberstajn is heading efforts to rescue Varig

Varig sought bankruptcy protection last month, having amassed debts of more than 9.5bn reals ($4bn, �2.2bn).

Its chairman said it was talking to both domestic and foreign investors and that TAP Air could buy a 20% stake.

The airline has suffered financial problems for years due to rising costs and growing low-cost competition.

New direction

On Tuesday, a bankruptcy court in Rio de Janeiro gave the company 60 days to put forward a restructuring plan.

Varig is trying to resurrect discussions with TAP which began earlier this year.

These were nullified when the Brazilian airline sought bankruptcy protection.

TAP never gave up on Varig David Zylberstajn

"Varig had to abandon the agreement with TAP when it started the judicial recovery process in June," Associated Press reported David Zylberstajn, Varig's chairman, as saying.

"But TAP never gave up on Varig."

Restructuring efforts were boosted on Wednesday when Varig's majority shareholder, employee organisation the Rubem Berta Foundation, agreed to give up control of the airline.

Under the management's proposals, the Foundation's stake would be reduced to 10% with Brazilian and foreign investors owning the bulk of the shares.