Varig

Varig (Viação Aerea RIo Grandense) is an airline based in Porto Alegre, Brazil. Until recently, it was Brazil's leading international airline and operated service to 17 countries on three continents, as well as 52 cities in Brazil. Its main hubs are Guarulhos International Airport (GRU), São Paulo, and Galeão International Airport (GIG), Rio de Janeiro, with secondary hubs at Congonhas International Airport (CGH), Salvador International Airport (SSA), Salvador, Presidente Juscelino Kubitschek International Airport (BSB), Brasília and Guararapes International Airport (REC), Recife.

Combined with its subsidiaries Rio-Sul and Nordeste, Varig carries approximately 13 million passengers annually and has over 11,000 full-time employees. In the year ending December 31, 2004, Varig had total operating revenues of $3.4 billion, of which about $3.15 billion was from flight operations. As of May 2005, Varig's share of passengers flying into or out of Brazil was 43% for the South American market, 17% for the United States market, 35% for the European market, and 48% for the Asian market.

History

Varig was the first airline in Brazil, established on May 7 1927 at the Porto Alegre Commercial Association meeting. It was there that Otto Ernst Meyer, a German immigrant, signed the certificate declaring Varig an airline company.

Varig's first plane was a nine passenger Dornier Wal flying boat. Its first employee, the Hungarian Ruben Berta, later became the airline's President and led the airline through great expansion until his death in 1966. The airline started operations on 15 July 1927. Varig's first flight was from Porto Alegre to Rio Grande, stopping in Pelotas.

It originally operated local services in southern Brazil, but added its first international route to Montevideo on 5 August 1942. Transatlantic services were started in February 1965, when the military government decided to shutdown Panair do Brasil, the country's flag carrier up until then. The airline took over the giant REAL consortium in 1961, making it the largest airline in South America. It acquired a controlling interest in Cruzeiro do Sul in June 1975, which was fully integrated into Varig in January 1993.

Varig has shareholdings in Nordeste Linhas Aereas Regionais (99%), Rio Sul Serviços Aéreos Regionais (97%), and Pluna (49%). Its cargo subsidiary, VarigLog, was sold to the Volo Brasil consortium in January of 2006. Another subsidiary, VEM - Varig Engenharia e Mecânica, Varig's maintenance centre, was sold to a consortium presided by Portuguese airline TAP Portugal. Varig is the only Latin American member of the Star Alliance and employs 10,572 staff.

Financial situation

Since 1945, Varig has been majority owned by the Ruben Berta Foundation (RBF)^*, a not-for-profit foundation formed in 1945 to provide health, financial, social and recreational benefits to the employees of the companies. RBF controls VARIG through a holding company, FRB-Par Investimentos S.A.

Long-running discussions to merge Varig with TAM Linhas Aéreas ended in 2004.

As of May, 2005, Varig had 87 aircraft (76 passenger, 11 cargo), with an average age of 13.2 years. 83 of the 87 had operating leases; the remaining four had finance leases.

As of June 2005, Varig had a negative net worth of approximately US $2.5 billion, with balance sheet debt of $2.8 billion and off-balance sheet debt of $2.0 billion.

On June 17, 2005, Varig applied to the Commercial Bankruptcy and Reorganization Court in Rio de Janeiro for the commencement of "judicial reorganization" proceedings pursuant to the New Bankruptcy and Restructuring Law of Brazil, Law No. 11.101, which had become effective only eight days earlier. Under the NBRL, debtors like Varig are permitted to remain in possession and control of their businesses and properties. Varig does however continue to provide service to and from Brazil despite its financial troubles.

On May 9, 2006, the judicial administrator of Varig's assets announced a decision had been reached about a recovery plan for the company. Varig is to be auctioned for a minimum bid of USD 860 million. If the minimum price is not reached, the company may be divided and its assets sold separately. ^*

On May 25, 2006, due to Varig not paying the leasing fees, one of Varig's Boeing 777 aircraft () was seized at John F. Kennedy Airport in New York City by its lessor, US Bank.

On June 8, 2006, an auction of Varig's assets (minus its debts) was held in Rio de Janeiro. The first round of bids, with a minimum amount of USD 860 million, ended with no bids. On the second round, which had no minimum bid limit, a group of Varig employees under the name NV Participações placed the only bid, offering USD 449 million for the airline. Since the amount was well below the minimum bid, the decision to sell the airline falls upon bankruptcy judge Luiz Roberto Ayoub. The next day, the bankruptcy judge issued an injunction forcing the airline to stop operating their fleet and to return the active jets to the owners by June 16. The order also called for Varig to return planes not in active use by July 1st.

As of June 20, 2006, the brazilian judge approved the sale to TGV, the consortium representing the airline workers. However, by June 21 Varig had cancelled 180 of its 356 flights. The airline officially announced these flights would be cancelled thru June 28. Also, a US Bankruptcy judge had allowed the airline to continue flying 16 leased planes until June 21. If the company ceases to exist before the World Cup in Germany is over, the government and other airlines are looking into providing transport for the Brazilian team and the fans back to Brazil. Since TGV did not meet the first deposit for US$75 million on Friday, June 23, the brazilian judge annulled the auction.

On Monday, June 26, VarigLog (previously bought by Volo and a US investment fund Matlin Patterson) made a bid for $500 million, including an immediate $20 million payment for which $3 million were paid the same Monday to keep the company afloat. The judge is still to decide if he will accept this offer. ^*

Incidents and accidents

Varig had five crashes with fatalities since 1970:

11 July 1973, Flight 820, near Paris, France, forced landing due to fire in a rear lavatory, 123 deaths and 11 survivors (10 crew, 1 passenger). The aircraft landed 5km short of the runway, in a full-flap and gear down configuration. The majority of passengers died of smoke inhalation.
30 January 1979, Varig 707-323C freighter, registration PP-VLU. Flown by the same captain of Flight 820 disappears over the ocean 30 minutes after taking off from Tokyo. No sign of the crash (wreckage or bodies) was ever found. The aircraft was carrying 153 paintings, worth USD 1.24 million.
3 January 1987, Flight 797, near Abidjan, Côte d'Ivoire, engine failure, 50 deaths, 1 survivor.
3 September 1989, Flight 254, near São José do Xingu, Brazil. Pilot navigational error led to fuel exhaustion and a forced landing in the jungle. Twelve of the 48 passengers were killed in the crash. The survivors were discovered two days later.
14 February 1997, Flight 265, at Carajas Airport, Brazil. Aircraft overran the runway and hit some trees while landing in bad weather. The first officer was killed on impact. The 51 others on board survived.

Destinations

See article Varig destinations. Many of Varig's flights to Europe and all to the U.S. have been suspended as of June 20th 2006

Fleet

The Varig all-Boeing fleet consists of the following aircraft (as of July 14, 2006):

The average age of Varig fleet is 12.9 years old in July 2006.

External links

Varig
Varig Passenger Opinions
Varig Fleet Age
Varig Fleet Details
Varig Bankruptcy News, Issue 1, June 18, 2005