By Jackson Flores in Rio De Janeiro
Varig has been auctioned to its employees, marking another step in the Brazilian flag carrier’s protracted battle for survival. The Varig Employee Group (TGV) will pay $449 million for the airline if the yet-to-be finalised deal proceeds.
The Rio de Janeiro business courts are now examining TGV’s business plan and its ability to conclude the transaction by putting up a $126 million deposit.
Comprising five Varig employee unions, TGV’s effort to save the floundering airline is reportedly backed by foreign investment groups. It has indicated that nearly 60% of its offer is to be funded via debentures and other sources that are now under scrutiny by the business court.
Luiz Roberto Ayoub, the judge supervising Varig’s case, says that should TGV’s bid be rejected, other bids may be examined in an attempt to avoid declaring the airline bankrupt. These include an $800 million offer made by Multilong and financed by Brazil’s state development bank, and a proposed bid by a consortium composed of Air Canada, the Brookfield Investment Group and TAP – reportedly in conjunction with TGV should its original proposal fail. Moreover, a further three investment groups have tendered bids for the Brazilian airline.
Compounding Varig’s troubles, US courts have ruled in favour of Boeing for the immediate return of two leased Boeing 777-200s and five MD-11s, as well as turning over three 737-300s by early July. Furthermore, Nissho Iwai is attempting to repossess two 767-200s, with International Lease Finance and Central Air following suit for four 757-200s and five MD-11s, respectively. With only 46 of its 60-aircraft fleet currently in operation, Varig’s dwindling domestic market share has fallen to a new 14.4% low – down from the 30.6% share it enjoyed a year ago. Lack of aircraft has forced Brazil’s flag carrier to cancel flights with increasing regularity over the last weeks. During the second week of June, the airline called off 40 flights – many of them on the key Rio de Janeiro-São Paulo shuttle service.
Source: Flight International
