Burdened by US dollar-denominated debts, Brazilian flag-carrier Varig suffered a net $89.8 million loss last year - much worse than 1999's $53.9 million loss. The situation is unlikely to improve in the near future, says vice president, audit and investor relations, Manuel Guedes, with Varig to remain in the red until at least next year as it amortises its debt.
Varig's turnover rose 15% to $2.94 billion, with traffic up 12.6%. Costs also fell, while load factor rose to 73%, but these improvements were more than offset by the impact of exchange rates.
With much of Varig's revenues generated domestically, the 1999 devaluation of the Brazilian real hit hard, and was compounded by rising (dollar-denominated) fuel prices and mounting lease debts (again paid in dollars). Interest charges on Varig's $1.3 billion debt - 79% dollar-denominated - swallowed $154 million for servicing alone, while fuel costs were $140 million more than planned.
Two Varig-controlled regionals, Rio-Sul Serviços Aéreos Regionais and Rotatur, made profits offsetting a $4.55 million loss at Nordeste Linhas Aéreas. The three reported an overall net profit of $1.1 million.
While Varig, Vasp and Transbrasil are suffering (the latter posting a $96.9 million loss), TAM scraped a $243,000 profit on sales of $1.03 billion and boasted a 32% leap in market share, to 28%, against Varig's 38%.
Source: Flight International
