Again pioneer, VARIG was the first airline in Latin America to operate third-generation Boeing 737 family, known as B737NG (Next Generation). The first Boeing 737-700, PP-VQA, arrived in November, 1998 and began operating on domestic routes. In December 1998, VARIG received three more units, PP-VQB, PP-VQC and PP-VQD.

Besides domestic routes, Boeing 737-700 also operated in Rio - São Paulo “Ponte Aérea" (Air Bridge) route and international flights to South America.  Boeing 737-700 incorporates new technologies and new features for passengers as monitors, more space for luggage and new cabin design. B737-700 also incorporates aerodynamic refinements, new cockpit (similar to Boeing 777), LCD displays and new CFM56-7 engines, slightly larger than the 300 version, quieter e more economical.

In January 1999, VARIG received the fifth unit, PP-VQE. This was the last unit of the original order placed in 1997, of fifteen Boeing 737-700s to replace the remaining Boeing 737-200s. However, the financial crisis faced by the company prevented the receipt of more units and VARIG was under increasing pressure to return its Boeing 737-700 due to lease non-payment.

In 2003, all B737-700 were eventually returned. PP-VQB in January, PP-VQD in February, PP-VQE in March, PP-VQA in April and PP-VQC in June. However, in the same year, VARIG merged with its regional subsidiaries Rio Sul and Nordeste and incorporated two Boeing 737-700 previously operated by Rio Sul, PR-SAF and PR-SAG. These two units remained operating at VARIG until the end of its operations, in June 2006.

Destination of VARIG's Boeing 737-700:
- To GOL: PP-VQA, PP-VQD, PP-SAF, PP-SAG
- To Hainan Airlines: PP-VQB, PP-VQC, PP-VQE

VARIG's Boeing 737-300 internal configuration:

1st: 118 seats
Business Class: 16 seats (2+2 seats per row)
Economy Class: 102 seats (3+3 seats per row)

2nd: 120 seats
Business Class: 12 seats (2+2 seats per row)
Economy Class: 108 seats (3+3 seats per row)

3rd: 132 seats (Economy Class only)

4th: 136 seats (Economy Class only)