Air Canada’s holding company would like to invest in Varig, but must first await the outcome of several issues.
VarigLog, which bought “New Varig” in July, confirms Canada’s ACE Aviation Holdings has been consulting with Varig for the past several months on its fleet renewal and its Smiles frequent flyer plan. Marco Antonio Audi, Varig Log’s chairman, confirms ACE has also expressed an interest in buying a stake in the Smiles plan, as well as a possible stake of up to 10% in the airline itself.
According to Audi, ACE would pay cash for its Smiles shares, but may offer other assets to cover at least part of its purchase of an equity stake in Varig. Specifically, ACE would transfer some of Air Canada’s Boeing 767s to Varig, which desperately needs aircraft to revive its dormant routes, and at least six of Air Canada’s delivery slots at Embraer for new E-190s. Varig would use the slots in conjunction with a regional jet order it is negotiating with Embraer and Brazil’s national development bank.
ACE has confirmed none of these reports, perhaps because any ACE investment still faces several major hurdles. First is the question of Brazil’s 20% cap on foreign ownership in an airline. US risk fund Matlin Patterson already holds a stake in the partnership that owns VarigLog. The government dropped an earlier inquiry into whether Matlin Patterson’s involvement exceeds the cap, but several lawsuits are still pending.
Second, New Varig still awaits an air operating certificate from Brazil’s civil aviation agency, ANAC. Before ACE invests in Varig it also will probably wait to see if Varig’s employees approve new collective bargaining proposals and agree to waive claims relating to layoffs. Whether and when these issues will be resolved remains uncloudy for now. ■
Source: Airline Business
