To Be Split Into Two Companies
What's this? A rather
abrupt about-face by creditors of the financially waterlogged
Brazilian flag carrier Varig.
One day after they turned down an offer from the company's
one-time cargo-wing, VarigLog, creditors have now given their okay
to the sale of the airline for a combined half-billion dollars.
"Today a new Varig is reborn," the airline's chief executive,
Marcelo Bottini, said to an audience of about 1,000 Varig employees
who attended the auction.
The move comes on the very day Varig assets were to go up for
auction, and the airline was set to fade into aviation history...
another footnote in the post-9/11 era.
Under the program, the Volo do Brasil investment group --
representing Variglog -- bought Varig for $24 million... and
pledged to invest another $485 million to resurrect the 79-year-old
airline. That's on top of the $20 million the group has spent
keeping Varig flying in recent weeks... money that is now
considered a down payment, of sorts.
The task of rebuilding Varig won't be easy... and, in the end,
it won't be the same airline.
Reuters reports that under the deal, Volo will get most of
Varig's routes, as well as most of its planes -- which has dwindled
to 13 aircraft, from 60 just a few months ago. It will also take
over Varig's "Smiles" frequent flyer program, which has six million
What Volo WON'T get, however... not that they mind... is the
debt load Varig incurred, that led to its filing for bankruptcy
protection. That pricetag -- more than $3.1 billion -- will be paid
back by long-time shareholder the Ruben Berta Foundation
It will not, however, inherit Varig's crushing debt load of more
than $3.1 billion. That will have to be paid back by another
company run by Varig's long-time controlling shareholder, a
nonprofit group called the Ruben Berta Foundation.
In the end, VarigLog was the only bidder for the whole
kit-and-kaboodle. There were auctions... but no one else came to