UPDATE 2-Brasil Travel drops IPO plan as demand wanes

* Firm asks regulators to drop plan to list shares

* IPO plan pulled on lackluster demand, sources say

* Bankers had mulled to cut price tag again-sources

* Company hoped deal to be Brazil first IPO in 2012 (Updates with company confirmation, background throughout)

By Joan Magee and Guillermo Parra-Bernal

Feb 9 (Reuters) - Tourism company Brasil Travel Turismo and its shareholders dropped plans to sell shares in an initial public offering, in what could be seen as a chilly start of the year for share offerings in Latin America's largest economy.

The São Paulo-based company, which originally sought to raise as much as 1.45 billion reais ($842 million) from the sale of new shares, asked regulators late on Thursday to cancel its request to become a publicly listed company.

Sources told International Financing Review and Reuters that the deal, which, if priced, could have been the first IPO in Brazil this year, floundered due to lack of investor demand.

The failure of the Brasil Travel IPO signals that investors, who last year steered clear from those deals as Europe's debt crisis worsened, will keep shunning companies with great ambitions but an insufficient track record, poor earnings visibility or that could be vulnerable to a downturn.

Brasil Travel had hired the investment banking units of Credit Suisse Group, Barclays Plc, Flow Corretora and Banco Santander to manage the IPO.

Market sources told Reuters on Thursday that bankers considered reducing the suggested price tag to as low as 850 reais a share to secure demand, and allowing existing shareholders to buy up to 50 percent of the offering, up from an initial 15 percent threshold.

Brasil Travel on Wednesday cut the suggested price per share to 1,000 reais ($578) from a prior range of 1,250 reais to 1,650 reais, Reuters reported on Wednesday. The company, the by-product of about 35 mergers, and shareholders said in a securities filing last month that they planned to offer up to 878,255 common shares.

IFR is a Thomson Reuters publication specialized in capital markets coverage.

NEXT WINDOW

According to the IFR, the next window for a possible offering by Brasil Travel could be early spring.

The company, which describes itself as Latin America's largest travel operator by sales volume, sells airline tickets, hotel reservations and foreign exchange services.

According to its IPO prospectus, sales reached 316 million reais in the first nine months of last year, compared with 250 million reais in the same period of 2010.

Brasil Travel planned to use proceeds from the IPO to create a single online sales platform, boost points of sale and offer more products under its Stella Barros and Vaivoando tourism agency brands.

Among shareholders of the tourism company are an investment vehicle controlled by Rio de Janeiro-based consultancy firm Dalty Assessoria, Banco Modal, and the founding partners of the 35 companies that merged to create Brasil Travel.

Last week, the Brazilian unit of Norway's Seadrill postponed plans to sell up to $1 billion of new shares in an IPO, citing the need to rework contractual terms with state-controlled oil company Petrobras. (Editing by Guillermo Parra-Bernal, John Wallace, Dave Zimmerman)