“Varig Airlines have cancelled all arriving and departing flights from Heathrow Airport from 21 July 2006 to 28 July 2006. Travellers are advised to contact Varig Airlines on 0870 120 3020”
I’m curious to know what your thoughts are on the future of Brazil’s national carrier? The ‘old’ Varig supposedly built up debts of more than $3billion and was recently bought at an auction for just $24million (or £13million). Volo de Brasil have announced their intentions to introduce more aircraft to the fleet and to re-commence international services in just 3 days time.
Do you believe that this stricken carrier can be on the road to recovery any time soon?
By: rdc1000 - 25th July 2006 at 14:53
Here is the previous post..
http://forum.keypublishing.co.uk/showthread.php?t=59964&highlight=varig
By: rdc1000 - 25th July 2006 at 14:42
We had a thread about this a couple of weeks ago, but I didn’t update with the latest. The latest is that VarigLog, the former cargo arm of Varig, bought the airoine for $24m, but assumed its huge debts with that. The creditors didn’t want varigLog to buy the airline, because from their perspective they’d be better off if the airoine was declared fully bankrupt, but in the end the bankruptcy judge overuled their votes and sold the airline. VarigLog wanted to cancle most flights to start again, but the regulator wouldn’t let them. Here…
VarigLog holding company buys Varig for $24m
Rainer Uphoff, Madrid (21Jul06, 01:22 GMT, 429 words)After overcoming numerous judicial obstacles, VarigLog’s holding company Volo has finally acquired Brazil’s Star Alliance carrier Varig in an auction.
The owner of Varig’s former cargo unit is paying $24 million for the bankrupt carrier, the minimum tender allowed. Volo was the sole bidder in today’s auction.
Volo, which is controlled by the US investment fund Matlin Patterson, still needs authorisation from Brazil’s CAA before the acquisition is effective. However, observers believe the approval VarigLog’s acquisition in 2005 should have resolved the main concern, foreign ownership.
The buyer has committed to invest $500 million in the newly purchased airline, now referred to as ‘new Varig’, including an immediate $75 million cash recapitalisation within 48h and another $75 million investment within 30 days. The remainder will be used to service certain post bankruptcy debts.
Volo has purchased the rights to use Varig’s brand and that of its regional subsidiary, Rio-Sul, as well as the carrier’s recently reduced fleet and route network. Currently, the carrier has only 13 operational aircraft serving a network of 25 domestic and international destinations.
The new owner says its immediate priorities include an increase of this fleet to at least 25 aircraft. Volo also says Varig’s work force will be reduced to less to 2,000 employees, down from the 10,000 employed at the beginning of the year.
Under the ‘new Varig’ recovery plan, all historic debts will stay with the ‘old Varig’, which will continue to be controlled by the carrier’s seller, the Rubem Berta Foundation (RBF), a deal that has been criticized by several creditors.
The ‘old Varig’ will retain an active air operator’s certificate and will fly a single aircraft as Nordeste, the name of Varig’s former regional subsidiary for northern Brazil. To pay off part of the debt, which is estimated at about $3.2 billion, the company will receive an annual royalty payment of at least $20 million for the next 20 years from ‘new Varig’.
A Varig spokesman tells ATI that the airline’s president Marcelo Bottini will continue in his role during the transition to the new owners and management.
According to a source close to Volo, the ‘new Varig’ owner is “well aware that bringing Varig back to its former position as Latin America’s leading airline” will require “huge investments” for which it has already “established contacts” with “important international institutional and industry investors”.
Canadian and Portuguese investors feature heavily in this plan, adds the source, although the source declined to confirm if this included Star Alliance carrier TAP Portugal, which has shown an interest in purchasing a debt free Varig.
Source: Air Transport Intelligence news
And here…
Varig forced to restore network early
Rainer Uphoff, Madrid (24Jul06, 09:38 GMT, 211 words)Varig has restored some of its domestic and international operations despite low load factors, after the Brazilian CAA (ANAC) rejected a request by the carrier’s new owners to ground most of its flights for a week.
The Brazilian carrier’s new owners, the holding company of former cargo subsidiary VarigLog, took the decision to cancel virtually all flights for a week after gaining control of the carrier on 21 July.
This was to avoid an “unnecessary drain on cash” from operating empty aircraft after the carrier’s difficulties prompted a massive migration of passengers to competitors, as well to give it time to restructure its network in line with its reduced operational capacity. During this restructuring period, only flights on Brazil’s busiest route between Sao Paulo and Rio de Janeiro were to be maintained.
But following the ANAC ruling, which prevents Varig from requiring other carriers to endorse its tickets, the airline will operate a core network of domestic flights, as well as the international routes to Buenos Aires and the Venezuelan city of Caracas, albeit with a lower frequency.
Varig says Frankfurt, London, Miami and New York will also be served, although not with its normal schedule. Frankfurt will be the only long haul route which will continue to be served daily.
Source: Air Transport Intelligence news
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July 25, 2006 at 12:55 pm