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Old September 13th, 2005, 05:27 AM   #61
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September 12, 2005
Brazil Air Shareholder to Give Up Control

The main shareholder of Brazilian flagship airline Varig will relinquish control of the company as part of a restructuring plan to prevent the carrier from collapsing under a mountain of debt.

Previous efforts to reorganize Varig have failed because of reluctance by the Rubens Berta Foundation, which represents employees, to cede control.

But that step is necessary to attract new investors and pay off debts of 7.7 billion reals ($3.3 billion), Varig said Monday in its long-awaited restructuring announcement. Nearly 60 percent of the debt is in overdue taxes and unpaid social security contributions.

"We won't fail to pay anyone. We just need time," Varig President Omar Carneiro da Cunha said.

The company presented its reorganization plan Monday to a Rio de Janeiro court and said it will meet with creditors Sept. 24 aimed at forming a creditors' committee representing their interests. Varig's full name is Viacao Aerea Riograndense SA.

As part of the restructuring, Varig _ the biggest carrier in Latin America's largest country _ plans to break itself into two companies.

The foundation, which owns 56 percent of Varig, would end up with a minority stake.

One division will manage most of Varig's current operational units plus two regional airline subsidiaries, Rio Sul and Nordeste. The second will include Varig's main administrative units and will manage debts and debt negotiations.

After the debt issues are resolved, the two companies will be merged, possibly within two years, Varig said.

The airline also said it will cut 13 percent of its 12,000 person work force by the end of 2006 in an effort to save about $168 million annually.

The carrier's fleet now stands at 78 planes, down from 118 in 2002, but the company did not say how many planes it would fly following the reorganization.

Varig said cutting costs, streamlining operations and boosting sales would generate some $307 million per year in revenue.

Varig's plan must be approved by creditors and by the court before it can be put in place. Creditors have until Dec. 17 to approve or reject the plan, said David Zylberstajn, Varig board chairman.

Portugal's state-owned TAP Air Portugal airline expressed interest in acquiring up to 20 percent of Varig months ago, but those talks fell apart after the foundation balked at giving up control of the airline.

Zylberstajn said TAP is now expected to take a close look at the restructuring plan, but hasn't yet made a formal proposal to take a stake in Varig.
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Old September 14th, 2005, 09:26 PM   #62
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Portugal's TAP Interested In Deal With Brazil's Varig
13 September 2005

SAO PAULO (AP)--Portugal's state-owned TAP Air Portugal (TPA.YY) airline will closely examine a restructuring plan proposed by Brazilian flagship carrier Varig (VAGV4.BR) to determine whether the two companies should join forces in some sort of alliance, a TAP spokesman said Tuesday.

"We're still interested" in doing business with Varig, TAP spokesman Antonio Monteiro said from Lisbon, Portugal. "We hope it can happen but it's too early to say how it might happen."

TAP first expressed interest months ago in taking a 20% stake in debt-laden Varig, but backed out after the Brazilian carrier's controlling shareholder balked at ceding control.

But Varig on Monday announced that the shareholder, the Rubens Berta Foundation - which represents employees - will reduce its 56% controlling stake to a minority position under terms of the plan.

Monteiro said TAP will now examine Varig's restructuring plan before deciding how or when the companies might develop a deal. The two airlines already have a code-sharing deal on some trans-Atlantic flights, and analysts have said they could both cut costs by eliminating overlapping routes.

Varig wants to attract new investors and pay off debts of $3.3 billion.

The company presented its reorganization plan Monday to a Rio de Janeiro court and will hold a meeting with creditors Sept. 24 to form a creditors' committee representing their interests. Varig's full name is Viacao Aerea Riograndense SA.

The airline also plans to cut more than 1,550 jobs - 13% of its workforce - by the end of 2006 in an effort to save about $168 million annually.

Varig's fleet now stands at 78 planes, down from 118 in 2002. The company didn't say how many planes it would fly following the reorganization.

Varig's plan must be approved by creditors and by the court before it can be put in place. Creditors have until Dec. 17 to approve or reject the plan.

The company in recent years has lost significant market share, particularly on the domestic front, to Brazilian carriers Gol Linhas Aereas Inteligentes SA and TAM Linhas Aereas SA.

Under the restructuring, Varig plans to concentrate on more profitable domestic routes and will consider adding more international routes, possibly to China and Japan. Brazil has one of the largest communities of people of Japanese descent outside Japan, and also has strong trade ties with China.

Varig also wants to become more efficient by streamlining its fleet to reduce maintenance costs. Currently, the carrier uses nine different planes made by six manufacturers.
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Old September 16th, 2005, 12:47 AM   #63
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Brazil's Not-So-Favored Airline
Once a Government Darling, Varig Faces Vagaries of Competition

By Geraldo Samor
14 September 2005
The Wall Street Journal

Rio de Janeiro -- FOR MUCH OF ITS 78-year history, Viacao Aerea Rio-Grandense -- known more commonly as Varig airlines -- was Brazil's pampered national champion; it got ahead by getting along with the government, which limited competition. But as Brazil unshackled its markets, those same government ties handcuffed the company.

When politicians wanted flights, Varig was lavish in handing out courtesy tickets. As the government sought to weave together this massive country, Varig flew to the hinterlands, whether or not routes were profitable. When Brasilia strengthened ties with Africa in the 1980s, Varig started flying to unprofitable destinations there.

"We had 100% market share in places that were not profitable," Chief Executive Officer Omar Carneiro da Cunha says.

Now Varig is struggling to stay aloft, mirroring the drama consuming old-style carriers world-wide. In Europe and the U.S., for example, deregulation unleashed a torrent of competition from new no-frills carriers, as well as stronger old-line rivals that capitalized on market liberalization.

Saddled by $3.3 billion of debt -- most owed to the government for back taxes and social-security payments -- Varig in June became the first major Brazilian company to seek protection from creditors under the country's new bankruptcy law, which allows companies to work out reorganization plans. Varig filed its plan with the court Monday.

Many non-Brazilians know Varig as the Latin American arm of the Star Alliance airline network, which includes United Airlines and Lufthansa. Varig has agreements with 211 airlines, including its 15 Star Alliance partners. According to a Varig spokesman, Star Alliance partners account for almost half of Varig sales made through other airlines.

At home, the airline's market share has dropped by half over the past four years to 26.5% in August, at a time when Brazil's market is expanding at a double-digit clip. It is losing business customers to TAM, which has become Brazil's No. 1 carrier by rolling out red carpets to business travelers and offering top-notch food. Meanwhile, Gol Linhas Aereas Inteligentes, which pioneered low-cost, low-fare travel in Brazil in 2001, is winning over tourists and other budget-conscious travelers. Recently, another low-cost carrier, Webjet, started operations linking four major cities, and two charter airlines received government permission to become regular carriers, adding to the price competition.

Older carriers in the U.S., meanwhile, are struggling with outdated work practices and weak finances. UAL Corp.'s United Airlines and US Airways Group have been stuck in Chapter 11 proceedings for more than two years because of trouble striking deals with unions and sorting out finances. Delta Air Lines and Northwest Airlines are flirting with bankruptcy filings unless staff make big concessions.

Europe's laggards hoped direct and indirect subsidies and political protection would help them survive in the face of stronger rivals, but largely have failed. Tougher European Union rules since the late 1990s have stopped much of that government support.

The Brazilian government didn't bail out troubled airlines, but until the mid-1990s it helped them by regulating prices and keeping the market protected -- although carriers were hurt by anti-inflationary plans that at times froze fares and crippled their bottom lines.

In Brazil, as in other markets, low-cost air travel is growing. After Gol saw its stock double since it went public in June 2004, a number of similar projects are springing up in the region, most notably in Mexico. That country's flagship carrier, Mexicana, recently launched low-cost airline Click, while Mexican media conglomerate Grupo Televisa SA said it plans to take a 25% stake in another low-cost airline to be launched next year. Gol also has extended its ambitions beyond Brazil, and plans to launch a Mexican low-cost carrier in 2006.

"The industry is undergoing a reality check," Gol CEO Constantino Oliveira said. "The majors will try to look more and more like the low-cost airlines."

As part of its reorganization plan filed Monday, Varig said it will cut staff by 13% by the end of 2006 as it tries to trim annual costs by roughly $168 million. It also will create a special-purpose company with the right to use its aircraft, brand and mileage program as well as other assets yet to be determined. Control of the new company, which won't carry the heavy debt that has crippled Varig, will be offered to investors such as private-equity funds. Portugal's state-owned TAP Air Portugal -- run by a former Varig CEO -- said it is interested in a stake in the Brazilian carrier. TAP has hired J.P. Morgan Chase & Co. and Brazilian law firm Mattos Filho to advise it on a possible bid.

If it succeeds, Varig will emerge as a scaled-down carrier in a growing Brazilian market. Over the next 20 years, Boeing Co. forecasts that Latin America will require 1,600 new planes costing $88 billion -- a market second only to China in projected air-travel growth. Brazil, the largest single Latin American market, likely will account for 43% of that total, or about 700 aircraft worth some $36 billion, says John Wojick, a vice president in Boeing's commercial-airplanes division.

If it fails, Varig will join the ranks of airlines that fell victim to mismanagement and competition during the past few years: Transbrasil stopped flying in 2001, and Vasp was grounded in January.

The company's first challenge is to come up with cash. It is trying to head off International Finance Leasing Corp., a unit of American International Group Inc., from seizing 11 of its 78 Boeing jets because it fell behind in lease payments. Fourteen Varig jets are grounded because the carrier lacks money for new parts or maintenance. Varig also regularly falls behind on salaries for its 17,000 workers.

The company is looking to raise about $100 million by selling its logistics division to U.S. private-equity fund Matlin Patterson. But the deal is being challenged in court by workers and pilots who complain the company is getting shortchanged. Varig's aircraft-maintenance division is also on the block.

To lead its rescue effort, Varig in July named Mr. da Cunha, a former Royal Dutch Shell and AT&T Corp. executive, as CEO. He quickly cut off service to some far-flung destinations in order to make aircraft available in areas of bigger demand. The company also is reducing the number of destinations it serves in South America.

The prospect of bankruptcy is producing big changes in an airline that once boasted of winning awards for the best selection of wine on board and best toilet kit. "It is of no use to offer a five-star service on a 40-minute flight when the customer is looking for frequency and price," Mr. da Cunha says.

---

Daniel Michaels in Paris contributed to this article.
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Old October 7th, 2005, 07:09 PM   #64
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Brazil Airlines Show 29% Rise in Passenger Miles Yr-On-Yr
7 October 2005

SAO PAULO (Dow Jones)--Paying passengers on Brazil's domestic airlines flew a total of 2.92 million kilometers in September, up 29.2% from September 2004, according to monthly figures published late Thursday by Brazil's Civil Aviation Department, or DAC.

No-frills operator Gol Linhas Aereas (GOL) surpassed Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, assuming the second position in market share, while Brazil's largest domestic carrier, Tam SA (TAMM4.BR), maintained its leadership in the market.

Gol showed a strong performance in September, with a market share of 28.8%, surpassing Varig, which dropped to the third position with 25.4% of market share.

In the meantime, Tam maintained its leadership with a market share of 43.20% in September. Smaller airlines accounted for the remaining 2.6% of the market, according to DAC data.

The number of passengers traveling on domestic routes is growing faster than capacity, which grew 17.3% in September, compared with a year ago, according to DAC.

The combination of more passengers and proportionately fewer seats pushed average load factors in Brazil to 71%, with Tam showing 70% utilization, Varig 70% and Gol 76%.

Varig and Tam have both seen load factors rise since they ended a code-sharing agreement earlier this year.

In the meantime, while Tam and Gol have enjoyed an increase in the number of passengers, Varig has confronted mounting difficulties.

Varig, which has a total debt of 7.7 billion Brazilian reals ($3.36 billion), may see more of its jets grounded because of lack of maintenance, according to local reports this week.

In September, Varig presented a business plan to a Rio de Janeiro bankruptcy judge designed to reorganize the company and attract new investors.
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Old October 12th, 2005, 03:51 AM   #65
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Brazil Court Grants Bankruptcy Protection To Airline Vasp
11 October 2005

SAO PAULO (Dow Jones)--A Brazilian court late Monday approved a bankruptcy protection petition filed earlier this year by grounded airline Viacao Aerea de Sao Paulo SA (VASP3.BR).

Vasp, which is saddled with heavy debts, stopped flying passenger routes in January. However, it continued to operate a cargo transport unit until Brazil's Civil Aviation Department, or DAC, closed the company completely in March.

According to local press reports, the company has total debts of 3 billion Brazilian reals ($1.33 billion).

"Our idea is to transform Vasp into a low-cost company," Vasp's government-appointed manager, Raul de Medeiros, was quoted saying by local news agencies.

Under bankruptcy protection, the company will have 60 days to present a recovery plan to creditors under Brazil's new bankruptcy law. New bankruptcy legislation took effect in June. Previously, it was difficult for companies to gain protection from creditors, and they could be forced to liquidate assets by judicial order.

Vasp has been experiencing financial difficulties since the 2001 recession that hit the industry and suffered a dramatic loss of market share in 2004.

In January, the company was obligated by DAC to stop operating regular flights because of worries about maintenance.

The latest news came amid a recovery for the industry in Brazil. According to DAC, paying passengers on Brazil's domestic airlines flew a total of 2.92 million kilometers in September, up 29.2% from September 2004.
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Old October 17th, 2005, 05:30 PM   #66
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Brazil Airline TAM Plans Share Offer, NYSE Listing -Report
17 October 2005

SAO PAULO (Dow Jones)--Brazilian airline TAM (TAMM4.BR), the country's largest domestic airline, is planning a new offer of shares and a listing on the New York Stock Exchange in early 2006, financial newspaper Valor Economico reported in its Monday edition.

The company, which in June raised 543.4 million Brazilian reals ($241.9 million) through the sale of 30.190 million shares, is planning to sell additional shares, according to the newspaper. Five investment funds that currently hold a 19.54% stake in the company will sell their shares as part of the new offer, Valor said.

According to the newspaper, the company also is planning to list its shares on the New York Stock Exchange.

Currently, TAM is controlled by Brazil's Rolim family, which holds a 58.86% stake.

The company declined to comment on the report when contacted by Dow Jones Newswires Monday.

On Friday, Tam's shares closed at BRL20.00. That's up from the initial public offering price in June of BRL 18.00.
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Old October 17th, 2005, 05:31 PM   #67
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Brazil Gol Airline Receives Its 39th Boeing 737 Aircraft
17 October 2005

SAO PAULO (Dow Jones)--Brazilian no-frills airline Gol Linhas Aereas (GOL) announced Monday that it has received its 39th Boeing 737 aircraft, maintaining its estimate to end 2005 with a total fleet of 42 jets.

So far this year, the company has added a total of 12 aircraft to its fleet of 39 planes. The company is expected to increase its existing fleet to 86 aircraft by the end of 2010.

In September, Gol surpassed Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, to assume second place in market share in Brazil behind TAM (TANC4.BR). Gol's market share in September was 28.8%.
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Old October 21st, 2005, 05:36 PM   #68
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Portugal TAP Still Wants To Invest In Brazil's Varig-Paper
21 October 2005

SAO PAULO (Dow Jones)--Portugal's state-owned TAP Air Portugal (TPA.YY) airline is still interested in investing in Brazilian flagship carrier Varig (VAGV4.BR) and could inject an initial $100 million into the company, said Varig President Omar Carneiro da Cunha, quoted by local financial daily Valor Economico in its Friday edition.

According to Cunha, TAP has relayed its interest through TAP President Fernando Pinto. Varig could offer its engineering and maintenance division, called VEM, as collateral in a capital injection by TAP, said Cunha.

Meanwhile, Cunha said he will travel personally to the U.S. to negotiate Varig debts with creditors.

Varig has struggled under the weight of a 7.7 billion Brazilian reals ($3.42 billion) debt load. The company has said BRL4.5 billion of the total is owed to the government as tax and social-security arrears.

Earlier this week, in an attempt to aid Varig, Brazil's National Development Bank, or BNDES, told potential investors it was willing to provide credit to buyers of certain Varig assets. BNDES said it would provide a special credit line to buyers of Varig subsidiaries VarigLog and VEM.

The BNDES said the airline, currently in the midst of a bankruptcy procedure, needs the equivalent of $62 million in the short term to maintain operations through 90 days of due-diligence by accountants. The BNDES said sale of Varig's cargo and maintenance assets would help in meeting such financial needs.

Along with TAP and BNDES, other groups have made proposals designed to save the airline, including Varig's current management, the airline's pilots union and local investor Nelson Tanure.

Varig also is suffering from a lack of maintenance on its jet fleet, which could result in almost half of the aircraft being grounded soon, according to local press reports.

And, according to official figures, Varig lost the second position in market share in Brazil to low-cost rival Gol Linhas Aereas SA (GOL) in September.
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Old October 24th, 2005, 09:00 AM   #69
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Varig rescue plan to be presented today
By JONATHAN WHEATLEY
24 October 2005
Financial Times

A last-minute rescue package for Varig, the indebted Brazilian airline, is expected to be presented to a New York bankruptcy court today by Brazil's government-owned development bank, Portuguese airline TAP and Matlin-Patterson, a US distressed equity fund.

Varig, under bankruptcy protection in Brazil from creditors owed about Dollars 3.3bn, is fighting to retain 20 aircraft that leasing companies have threatened to sequester after the airline failed to make payments of about Dollars 62m. Fifteen of its 76 aircraft are grounded for lack of maintenance. The court has given Varig until November 11 to present plans to meet its short-term debts with leasing groups.

The development bank, known as the BNDES stepped in last week, reportedly after President Luiz Inacio Lula da Silva insisted to ministers that Varig should not be allowed to collapse. The BNDES offered to provide the Dollars 62m needed in the short term in finance for a special purpose company that would be established by private investors to buy Varig's cargo company,VarigLog, and its aircraft maintenance company, VEM.

Under the BNDES plan, the SPC would buy two-thirds of the shares in Varig-Log and VEM. Following due diligence, the BNDES may provide additional finance to meet the full purchase price, should it exceed Dollars 62m. Both TAP and Matlin-Patterson, separately, have expressed interest in taking part and will join the BNDES at the bankruptcy court today.

Mr Lula da Silva's decision that the BNDES should intervene reportedly overruled the finance ministry and senior executives at the BNDES, who were willing to leave Varig's future in the hands of the market.

Those who opposed the plan reportedly argued there was little guarantee that the BNDES would be repaid, and that the plan would set a precedent. Vasp and Transbrasil, long-time competitors of Varig's, have stopped flying after failing to reach agreement with creditors.

Varig has announced that 1,500 of its 12,000 staff would be cut as part of a plan to reduce expenditure by Dollars 168m a year and increase revenues by Dollars 307m from the current Dollars 2.2bn. The plan involves creating a "new" Varig to operate Varig's airline services, leaving an "old" Varig with the company's assets and liabilities. The new Varig would pay the old company for use of the Varig name and for use of aircraft and other assets.
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Old October 25th, 2005, 04:24 PM   #70
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Portugal Airline TAP Eyes Help For Brazil's Varig -Report
25 October 2005

SAO PAULO (Dow Jones)--Portugal's state-owned TAP Air Portugal (TPA.YY) airline made a proposal to invest up to $500 million to restructure Brazilian flagship carrier Varig (VAGV4.BR), financial daily Valor Economico reported in its Tuesday edition.

TAP's proposal was made through a bankruptcy court in New York, the newspaper said.

Varig, which filed for bankruptcy in June, has struggled under the weight of a 7.7 billion Brazilian reals ($3.4 billion) debt load. The company has said BRL4.5 billion of the total is owed to the government as tax and social-security arrears.

TAP said that it wants to participate in a recovery plan launched recently by Brazil's National Development Bank, or BNDES.

Under the plan, BNDES told potential investors it was willing to provide credit to buyers of certain Varig assets. BNDES said it would provide a special credit line to buyers of Varig subsidiaries VarigLog and VEM.

According to BNDES, Varig needs the equivalent of $62 million in the short term to maintain operations through 90 days of due-diligence by accountants. The BNDES said the sale of Varig's cargo and maintenance assets would help in meeting such financial needs.

Along with TAP and BNDES, other groups have made proposals designed to save the airline, including Varig's current management, the airline's pilots union and local investor Nelson Tanure.

In addition to the heavy debt load, Varig also is suffering from a lack of maintenance on its jet fleet. The maintenance woes could result in almost half of Varig's aircraft being grounded soon, according to local press reports.

Furthermore, Varig in September lost its grip on second place in Brazilian market share to low-cost rival Gol Linhas Aereas SA (GOL), according to official figures.
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Old October 29th, 2005, 07:00 AM   #71
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Brazil's TAM Air Seeks Authorization For London Flights
28 October 2005

SAO PAULO (Dow Jones)--Brazilian airline TAM (TAMM4.BR), the country's largest domestic airline, has asked for authorization to operate flights to London, the company said Friday in a statement.

TAM said the company has asked permission from both domestic and international agencies. The company did not offer a timetable for obtaining authorization.

The company recently announced the start of flights to New York.

In September, according to Brazil's Civil Aviation Department, TAM maintained its leadership in the Brazilian market with a market share of 43.2%, while traditional flag carrier Varig lost its second-rank position to no-frills operator Gol Linhas Aereas (GOL).
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Old November 2nd, 2005, 01:53 AM   #72
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Brazil's Varig Accepts TAP Partnership Proposal
1 November 2005

SAO PAULO (Dow Jones)--Brazil's embattled flagship airline, Viacao Aerea Rio-Grandense, or Varig, (VAGV4.BR) chose to accept a proposal by TAP Air Portugal (TPA.YY) to be its partner in the first stage of the restructuring of the debt-ridden company, Varig said in a press statement issued late Tuesday.

Varig will now send the proposal to the Brazilian National Development Bank for approval.

TAP will deposit $62 million into the accounts of leasing firms to avoid the repossession of 20 to 40 Varig airplanes, thus giving Varig time to restructure the rest of the company's debt, according to the statement.

Varig filed for bankruptcy in July under the weight of approximately 7.7 billion Brazilian reals ($3.4 billion) in debts. The company said TAP undertook to make the deposit before the Nov.9 deadline set by a New York bankruptcy court to conclude negotiations.

Last week, Varig invited investment proposals from six firms that showed interest in the debt-saddled airline: TAP Air Portugal (TPA.YY), Brazil's Docas Investimentos S/A, U.S. investment fund Matlin Patterson, Brazil's Ocean Air, a consortium of Varig employees and French maintenance group ATS. According to local media reports, Docas and the Varig employee consortium have dropped out.

Under a restructuring plan proposed by the BNDES last week, the new partner would take over Varig's profitable logistics and maintenance subsidiaries, VarigLog and Varig Engenharia e Manutencao, in return for making the $62 million deposit. The government bank would then fund the purchase. However, Varig did not say if the TAP proposal involved buying the subsidies.

According to the Varig statement, the Rubem Berta foundation, which owns 56% of the company, chose to accept the Portuguese offer during a meeting on Tuesday afternoon, making the decision unanimous among Varig's board of directors.

TAP also reiterated its interest in taking part in the rest of the restructuring of Varig, and is willing to invest up to $500 million to put the company back on its feet, Varig said.
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Old November 2nd, 2005, 01:54 AM   #73
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Brazil Airline Gol Seeks Expansion Amid Record Profits
1 November 2005

SAO PAULO (Dow Jones)--Positive third-quarter results have emboldened Brazil's low-cost airline, Gol Linhas Intelligentes SA (GOL), to pursue aggressive expansion plans over the next couple of years, company officials said Tuesday.

The new focus for the no-frills airline will be international routes in Latin America, with new flights scheduled from Sao Paulo to Santa Cruz, Bolivia in November, and to Assuncion and Montevideo over the next year.

"Our plan is to offer the same quality, low cost service abroad, while continuing to expand at home," said Constantino de Oliveira Jr., Gol's president, during a conference call Tuesday.

To attend the new markets, the airline plans to add 12 new Boeing 737 airplanes to the fleet in 2006, taking the total number of aircraft to 54 from a forecast 42 at the end of this year. This will lead to a 45% increase in available seat-kilometers.

Not only will there be more planes, they will be of greater capacity. The company will take four Boeing 737-300s, with a maximum capacity of about 149 seats, out of commission and bring in 12 Boeing 737-800s, with a capacity of about 189 seats.

The larger planes will afford major cost savings, not only because of economies of scale but also because they will be able fly longer routes, said Richard Lark, Gol's financial vice president.

Meanwhile, a reduction in the average age of the company's fleet, which is projected to fall to 4.8 years by 2007 from the current level of 8.5 years, will cause a dip in maintenance costs, he added. Maintenance costs will also be cut with the opening of Gol's own maintenance plant in the Minas Gerais state next year.

As a result, Gol forecasts it will be able to lower costs per available seat-kilometer by 4% next year.

"These cost cuts will allow us to continue our policy of cutting prices and generating demand for flights from people who aren't accustomed to flying," said Oliveira.

He forecasts that net revenues for 2006 will rise to about 4 billion Brazilian reals ($1.78 billion) from an estimated BRL2.8 billion to BRL3 billion this year.

Late Monday, Gol reported record net profits of BRL138.2 million, up 42.6% on the same quarter last year and well above market expectations. Investors reacted quickly to the news, with Gol preferred shares up 6.0% on the day at BRL41.57 on the local Bovespa market at 1700 GMT, outperforming the 1.3% gain on the Ibovespa index.

Oliveira boasted that the company is the world's most profitable low-cost airline, registering an EBITDA margin of 35.9% this year, compared with Ryanair's (RYAAY) margin of 34.3% and Southwest's margin of 19.3%.

High oil prices are expected to continue to weigh on the company's costs but Brazil's continued economic growth should stimulate new demand for local flights, said Lark.

Gol was forced to raise fares by 18% in October due to increased fuel costs, said Oliveira. However, the government-controlled fuel company, Petrobras, is expected to reduce aviation fuel prices by 10% to 14% in November, which will mean the company won't need to raise fares again and will allow it to reduce prices on certain routes, he added.

Despite expressing its aim to grab a larger share of Brazil's international market, Gol is working on the assumption that Brazil's embattled flagship airline, Viacao Aerea Rio-Grandense, or Varig, (VAGV4.BR) will maintain its position as leader in this market.

"International growth will be achieved based on existing bilateral agreements. We do not need to take over Varig's routes," said Oliveira.

Over the next couple of years, Oliveira predicted the competition will not be able compete with Gol's low fares indefinitely and there will be opportunities for the company to increase yields in the next couple of years.

Beyond 2006, Gol forecasts it will increase its fleet to 86 planes by 2010, while maintaining the rate of seat occupation at around 74% - the highest in the industry in Brazil.

Oliveira said Gol does not fear newcomers, such as Ocean Air, who are trying to repeat the success of the company's low-cost, no-frills model.

"They need to bring new attributes to the market. Otherwise it will be very tough to compete with a company that is already established," he said.
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Old November 7th, 2005, 08:55 PM   #74
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Portugal's TAP to buy subsidiaries of Brazil's struggling Varig airline
7 November 2005

SAO PAULO, Brazil (AP) - Portugal's TAP airline plans to take over two subsidiaries of Brazil's struggling Varig airline and help the Brazilian carrier pay off its multibillion-dollar debt, a lawyer for TAP said Monday.

TAP Air Portugal plans to pay US$62 million Tuesday for VarigLog and VEM, the profitable cargo and maintenance subsidiaries of Brazil's flagship airline, Jose Roberto Opice said.

The money will be used to pay off Varig debts with leasing firms that have threatened to repossess 20 to 40 aircraft, he said.

"We have made the offer to help recuperate the company, and we expect the creditors (will) accept it," Opice told Dow Jones newswire by telephone from Rio de Janeiro.

The sale is part of a plan to allow Viacao Aerea Rio-Grandese, or Varig, to keep flying while it restructures its debts. Varig's debts total some 7.7 billion Brazilian reals (US$3.4 billion), and forced the company to file for bankruptcy in July.

Meanwhile, the leasing firms separately filed bankruptcy proceedings against Varig in a New York court, which gave the company until Wednesday to pay the US$62 million debt.

TAP has set up a Brazilian firm, Aero-LB Investimentos S.A., to receive financing from Brazil's government-run development bank, or BNDES. The bank reportedly will finance US$42 million of the US$62 million TAP would pay for VarigLog and VEM.
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Old November 8th, 2005, 05:25 PM   #75
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Creditors In Brazil's Varig Approve TAP Bailout Deal
8 November 2005

SAO PAULO (Dow Jones)--Creditors in embattled Brazilian airline Viacao Aerea Rio-Grandese (VAGV4.BR), or Varig, voted overwhelmingly in favor of accepting a proposal by TAP Air Portugal (TAP.YY) to take over Varig's profitable cargo and maintenance subsidiaries for $62 million, a Varig press spokeswoman said Tuesday.

However, an assembly of creditors in Rio only voted after twelve hours of discussions and the intervention of the Brazilian National Development Bank, or BNDES, to convince wavering voters, she added.

The sale of the subsidiaries is designed to allow the company to continue operating while it forms a plan to restructure its debts. Varig filed for bankruptcy in July under the weight of BRL7.7 billion ($3.4 billion) in unpaid commitments.

The company needs $62 million pay off leasing firms that have threatened to repossess 20 to 40 aircraft. A New York bankruptcy court had set a deadline of Nov. 9 for Varig to stump up the cash.

TAP will deposit the funds Tuesday, said Jose Roberto Opice, a TAP lawyer.

BNDES will finance $42 million of the purchase, according to a proposal submitted to the assembly. TAP has already set up a Brazilian firm, Aero-LB Investimentos S.A., to receive the BNDES money.

Aero-LB was set up with a Macau-based investment fund GeoCapital and an unnamed Brazilian investor.

"But the guarantor of this operation is TAP," Fernando Pinto, TAP president, told the creditors.

The airline sector unions and the Varig workers' group abstained on the vote, complaining at a lack of information about the investment company and other aspects of the proposal.

For years, Varig has been the leading Brazilian airline, but increased competition from low-cost rival Gol Linhas Aereas SA (GOL) meant it lost second place in the Brazilian domestic market in September.
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Old November 21st, 2005, 08:44 PM   #76
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Brazil Airline Varig Names New Chairman, Board Pres
21 November 2005

SAO PAULO (Dow Jones)--Debt-laden Brazilian airline Viacao Aerea Riograndense SA (VAGV4.BR), or Varig, on Monday appointed a new chairman and two new directors to its board, including the board's president.

Marcelo Bottini, who has worked at Varig since 1979, will assume the post of chairman, replacing David Zylberstajn.

Humberto Rodrigues Filho, a retired Varig worker, will assume the presidency of the company's board of directors, replacing Omar Carneiro da Cunha. Sergio Bruni will replace Eleazar de Carvalho on Varig's board.

Varig said late Friday that Fundacao Rubem Berta, which owns a majority of the airline's shares, decided to replace the three executives after Varig workers demanded changes in the wake of the company's decision to fire more than 100 pilots.

Varig has suffered severe financial difficulties since the airline industry went into a worldwide recession in 2001. Varig's net debt is estimated at about 7.7 billion reals ($3.47 billion).

In the first nine months of 2005, Varig posted a net loss of BRL778.1 million against a net loss of BRL305 million in the same period a year earlier.

The company also has seen a continued drop in its market share, resulting in the loss of the No. 2 position in the domestic market to Gol Linhas Aereas SA (GOL).
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Old November 28th, 2005, 06:35 PM   #77
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Grounded Brazil Airline Vasp Registers Plan To Fly Again
28 November 2005

SAO PAULO (Dow Jones)--Brazil's grounded airline Viacao Aerea de Sao Paulo (VASP3.BR) registered its intentions to restructure its debt and restart operations at a Sao Paulo bankruptcy court last week.

The company has been prohibited from flying since January due to its heavy debts with suppliers, airports and the passenger aviation authority.

But in October, the Sao Paulo court granted bankruptcy protection to the company and it is expected to deliver its recovery plan to that court by Dec. 12, according to local business daily Valor Economico.

The provisional plan, set up by Sao Paulo-based Tendencias consultants, involves the company returning to operations with 27 planes, using a low-cost, no-frills model similar to that used by Gol Linhas Aereas Inteligentes SA (GOL).

The key question remains how the company will operate day-to-day without a major cash injection. The company will look to recuperate some of its debts by selling some of its property, said the press report.

The decline of Vasp has allowed Gol to expand rapidly in the domestic market. Over the past four years since its inception, it has raised its market share from nothing to 29%.

Vasp has approximately 3.5 billion reals ($1.58 billion) in debts.
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Old November 28th, 2005, 06:36 PM   #78
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Brazil's Airline Gol To Give Customers 3 Years To Pay
28 November 2005

SAO PAULO (Dow Jones)--Brazil's no frills airline Gol Linhas Aereas Inteligentes SA (GOL) will give passengers up to three years to pay for tickets in an effort to attract customers from lower income brackets, a company press release said.

An application for the tickets 15 days in advance will allow Brazilians to pay in 36 installments, subject to credit checks, it said.

"We always look to stimulate the market and create opportunities for more Brazilians to benefit from air transport," said Tarciso Gargoni, Gol's marketing vice president.

Gol became the country's first low-cost airline in 2001 and since then has registered breakneck growth. As of October, the airline had grabbed 28.7% of the domestic market, and the company claims to have attracted 3.5 million first-time flyers with its cheap prices.

Gol is looking to continue its high growth rate in the next five years, with plans to double its fleet to 86 planes by 2010 and increase the number of routes in Latin America. The company already flies to Buenos Aires and Santa Cruz de la Sierra in Bolivia, and plans to start flights to Asuncion, Paraguay, soon.

In addition, in the second quarter it expects to launch a low-cost airlines in Mexico with local partner Inversiones y Tecnicas Aeroportuarias SA, or IT.
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Old December 2nd, 2005, 01:40 AM   #79
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Brazil's Varig Has Extra 20 Days To File Restructure Plan
1 December 2005

SAO PAULO (Dow Jones)--Brazil's embattled flagship airline Viacao Aerea Rio-Grandense (VAGV4.BR), or Varig, has an extra 20 days to present a debt restructuring plan after a Rio de Janeiro court said it had miscalculated the deadline, a spokesman for a Rio de Janeiro court said Thursday.

Varig now has until Jan. 8 to agree terms with a new partner and submit the plan.

The company filed for bankruptcy at a Brazilian court in June under the weight of a debt load of approximately 7.7 billion Brazilian reals ($3.4 billion).

Last month, Varig closed a deal to sell its profitable cargo and maintenance subsidies to a consortium led by Portuguese airline TAP (TAP.YY) for $62 million in order to avoid the repossession of a number of its jets in the U.S.

For years, Varig has been the leading Brazilian airline. It remains the dominant international carrier but increased competition from low-cost rival Gol Linhas Aereas AS (GOL) meant it fell to third in the Brazilian domestic market in September.
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Old December 5th, 2005, 10:48 PM   #80
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Brazil Airlines See Nov Passenger Miles Rise 21% On Yr
5 December 2005

SAO PAULO (Dow Jones)--Paying passengers on Brazil's domestic airlines flew a total of 2.87 billion kilometers in November, up 21.1% in the same month last year, according to monthly figures published by Brazil's Civil Aviation Department, or DAC, Monday.

The increase in traffic was due to more flights being run by Brazil's largest local carrier, TAM SA (TAMM4.BR), and no-frills operator Gol Linhas Aereas (GOL) compared with last year

The growth occured despite a reduction in the average number of seats filled to 69% from 70% last year. The number of passenger kilometers fell from 3.18 million in October.

TAM remained the market leader in November, accounting for 43.8% of all passenger kilometers flown, which was the same as October and up from 39.2% last year. Meanwhile, Gol increased its advantage over Viacao Aerea Riograndense SA (VAGV4.BR), or Varig. Gol had 29.1% of the market last month compared with 23.9% registered in November 2004. Varig held 24.8% compared with 33.4% last year.

Gol and TAM both took advantage of a decline in Varig's passenger kilometers of 10.3% to 710,470. Varig continues to struggle under the burden of crippling debts. The company sought bankruptcy protection in June.

The number of kilometers flown by paying passengers on international flights run by Brazilian companies dropped to 1.909 billion in November, down 2.5% on the year. Varig maintains its leadership in this market, accounting for 75% of all kilometers traveled. However, by increasing international flights, TAM raised its share by 5.8 percentage points to 21.9% in the year until November.
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