Merger now seems to be the last thing on the agenda at Brazil's two biggest airlines. Apart from their domestic codeshare, TAM and Varig seem intent on planning separate futures.
It is hard to reconcile this with statements six months ago, when they delayed integration but said they would keep alive the prospect of merger within several years. Judging from their current actions, merger is no longer suspended; it has been scuttled.
The clearest sign is in their capitalisation plans. TAM has recruited an initial public offering specialist and, according to local reports, is preparing to offer 20% of its shares next March.
Varig's plans are less precise, but TAP-Air Portugal is eyeing a 20% stake. Brazil's development bank also continues to talk of investing in Varig and it has raised the prospect of other private investors.
Selling shares to new investors is inconsistent with any merger, which would inevitably force some dilution in ownership. For their own reasons, TAM's president Marco Antonio Bologna and Varig's unions range from cool to cold on any merger. TAM has been reviving overseas routes, ending deference to Varig in those markets. In short, all signs point toward separate futures.
But TAM and Varig still must appease competition authorities, which are unwilling to allow their profitable codeshare to continue unless it is a step toward integration. Varig still must find some mechanism to address its $2 billion debt and the cash shortages that as recently as June have forced it to pay its staff in installments.
Source: Airline Business
