Varig

Infobox_Airline
airline=VARIG
logo=VarigNovoLogo.pnglogo_size=200
fleet_size=30
destinations=18
IATA=RG
ICAO=VRN
callsign=VARIG
parent=Gol Linhas Aéreas Inteligentes S.A. (also parent company of Gol Transportes Aéreos)
founded=1927, Porto Alegre, Brazil, as Viação Aérea Rio-Grandense S.A
2006, São Paulo, Brazil, as VRG Linhas Aéreas S.A.
headquarters= São Paulo, Brazil
key_people= Constantino Oliveira (CEO)
hubs=Guarulhos Int'l Airport
Congonhas Int'l Airport
Galeão International Airport
Brasília International Airport
frequent_flyer=Smiles
lounge=Business Class, Smiles Gold and Diamond Members Lounges

website= http://www.varig.com|

VRG Linhas Aéreas S.A., operating as VARIG (an acronym for Viação Aérea RIo Grandense), is the Brazilian flag carrier airline owned by Gol Linhas Aéreas Inteligentes (parent company of Gol Transportes Aéreos) based in São Paulo, Brazil. From the 1960s until the mid-2000s, it was Brazil's leading international airline. In 2005, the airline went into judicial reorganization (similar to bankruptcy protection). “VARIG’s Productive Unit” (UPV) was acquired in an auction by the Volo do Brasil consortium, which included former cargo subsidiary, VarigLog. A new company emerged and was named as VRG Linhas Aéreas in October 2006, but continued to operate under the VARIG brand.

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 aircraft 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 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.

VARIG initially operated local services in southern Brazil, but added its first international route to Montevideo on 5 August 1942. The airline took over the REAL consortium in 1961, making it the largest airline in South America. 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. It acquired a controlling interest in Cruzeiro do Sul in June 1975, which was fully integrated into VARIG in January 1993.

VARIG had shareholdings in Nordeste Linhas Aéreas Regionais (99%), Rio Sul Serviços Aéreos Regionais (97%), and Pluna (49%). Its cargo subsidiary, VarigLog, was sold to the Volo do Brasil consortium in January 2006. Another subsidiary, VEM Maintenance & Engineering, VARIG's maintenance centre, was sold to a consortium presided by Portuguese airline TAP Portugal.

Financial situation

From 1945 until the sale to Volo do Brasil, VARIG was majority owned by the Ruben Berta Foundation (RBF), [ [http://www.rubenberta.org.br/htdocs/ind.html Ruben Berta Foundation] ] a not-for-profit foundation formed in 1945 to provide health, financial, social and recreational benefits to the employees of the companies. RBF controlled VARIG through a holding company, FRB-Par Investimentos S.A.

Long-running discussions to merge VARIG with TAM Airlines ("TAM Linhas Aéreas") ended unsuccessfully 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.

Bankruptcy

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 did 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 that VARIG was to be auctioned for a minimum bid of US$860 million. If the minimum price would not be reached, the company could be divided and its assets sold separately. [ [http://oglobo.globo.com/online/economia/mat/2006/05/09/247111404.asp O Globo] ]

On May 25, 2006, because VARIG did not pay the leasing fees, one of its Boeing 777 aircraft (airreg|PP|VRE) was seized at John F. Kennedy Airport in New York City by its lessor, US Bank.

VARIG's Auctions

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 US$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 US$449 million for the airline. Since the amount was well below the minimum bid, the decision to sell the airline fell upon bankruptcy judge Luiz Roberto Ayoub. The next day, the bankruptcy judge issued an injunction forcing the airline to stop operating its 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 1.

On 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 through June 28. Also, a US bankruptcy judge had allowed the airline to continue flying 16 leased planes until June 21. If the company ceased to exist before the World Cup in Germany was over, the government and other airlines were 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 June 26, VarigLog (previously bought by Volo and the 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 day, to keep the company afloat.

VARIG's sale to VarigLog

On July 20, 2006, VARIG was sold to Volo for $24 million. Volo did not inherit VARIG's previous debt but committed to complete financial reforms in order to bring the airline up again. The "old VARIG" and its debts remained as Nordeste Linhas Aéreas Regionais. The next day, the "new VARIG" canceled all its flights, except for Rio de Janeiro-São Paulo shuttle service. The airline reported it needed more time to bring additional planes into service and all flights were canceled until further notice.

On July 28, 2006, VARIG announced it was cutting 60% of its staff. VARIG laid off 5,500 of the 9,485 jobs, with a remaining workforce of only 3,985.

On August 23, 2006, VARIG announced plans to lease 50 new Embraer ERJ 190/195 aircraft under the BNDES Bank in Brazil. VARIG also claimed it was in negotiations with aircraft manufacturers Boeing and Airbus.

On September 13, 2006, VARIG announced its intentions to resume more international flights in two stages, when given authorization by federal aviation authorities. In the first stage, Varig planned to resume flights to Mexico, Peru, and the UK within 180 days. In the second stage, flights to Chile, United States, and Portugal were expected.

On November 29, 2006, VARIG announced expansion to its domestic routes for the Brazilian summer season. VARIG would begin seven new routes (including three new destinations) starting December 18, 2006, and lasting through March 4, 2007. [" [http://www1.folha.uol.com.br/folha/dinheiro/ult91u112718.shtml Varig começa a operar mais 7 rotas em dezembro] ," "Folha Online"]

On December 14, 2006, under a deal worked out between new VARIG, the bankruptcy court, the two agencies regulating commercial aviation and VarigLog the new owners of VARIG, new air operators certificates (Certificação de Homologação de Empresas de Transporte Aéreo - CHETA) were granted by Brazil's National Civil Aviation Agency (ANAC) to new VARIG (VRG Linhas Aéreas) [Agência Nacional de Aviação Civil 14 December 2006] [" [http://www1.folha.uol.com.br/folha/dinheiro/ult91u113136.shtml Varig recebe certificado de homologação e concessões da Anac] ," "Folha Online"] . VarigLog purchased the ailing airline in July 2006 for $24.5 million. Soon after the certificates´ arrival, orders for 16 aircraft were announced, to bring the fleet to 31 aircraft. [Flight International 12-18 December 2006]

On December 21, 2006, VARIG Brazilian Airlines (or "old" VARIG) was suspended from membership in Star Alliance as of 31 January 2007 because it did not fulfill membership requirements. [" [http://www.staralliance.com/en/press/press_releases/2006/20061221_RGleavingstaralliance.html VARIG leaving Star Alliance] " 21 December 2006]

The new VARIG had struggled to find a strategic partner, after relaunch in December 2006, with aircraft, network and personnel inherited from the old airline. Lack of market credibility and the suspension of domestic and international routes led to monthly losses as high as US$20 million. In January 2007 LAN Airlines of Chile offered a US$17.1 million loan, in an unsuccessful attempt to acquire a 20% stake in the airline.cite news | author= Jackson Flores | title= Brazil's Gol nets ailing Varig successor | work= Flight International | page= 8 | date= 2007-04-03 ]

Gol Linhas Aéreas Inteligentes purchase of VARIG

On March 28, 2007, Gol Linhas Aéreas Inteligentes, the parent company of budget carrier Gol Transportes Aéreos, purchased VARIG for US$320 million. Gol announced that VARIG would continue to operate under its original name. The fleet of 17 aircraft was to be increased to 34, consisting of 20 Boeing 737 and 14 Boeing 767. With the new fleet VARIG would operate to 12 international destinations: Buenos Aires, Bogotá, Caracas, Frankfurt, London, Madrid, Milan, Paris, New York, Miami, Mexico City and Santiago. VARIG's international flights would no longer have First Class, therefore consisting only of Economy Class and Business (Executive) Class. Key domestic services would be operated, including the Rio de Janeiro to São Paulo shuttle, using VARIG's 124 slots at Congonhas-São Paulo International Airport.

On June 21, 2007, Constantino de Oliveira Jr., the CEO of Gol Transportes Aéreos announced VARIG's immediate future plans for its fleet and destinations. The plan included the acquisition of nine of the more fuel efficient Boeing 737-800 model and 10 Boeing 767. Constantino also announced that the airline was in negotiations with both Boeing and Airbus for the acquisition of either Boeing 787 or Airbus A350 aircraft. The plan also included flights to Madrid, London, Paris, Milan, Rome and Mexico City by the end of 2007, and New York City and Miami in 2008. [ [http://br.noticias.yahoo.com/s/reuters/070621/economia/negocios_aereas_gol_entrevista_pol_1 Interview-The Expansion of Varig (in Portuguese)] 21 June 2007] In January 29, 2008, however, VARIG stated that it would end flights to Frankfurt, Rome, and London" [http://money.cnn.com/news/newsfeeds/articles/prnewswire/SPTU00129012008-1.htm VRG Redefines its Business Strategy] ," "PR Newswire"] . And, in April 10 the same year, the company announced it would suspend operations in Mexico City, Madrid and Paris, therefore focusing its routes network in Brazil and South America.

Statistics

As of 2004, combined with its subsidiaries Rio-Sul and Nordeste, VARIG carried approximately 13 million passengers annually and had over 11,000 full-time employees. As of 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. As of February 2007, VARIG held 4.54% of the domestic Brazilian market, doubling its previous 2.2% share of August 2006, but still well below the 25.02% held in August 2005, and only 21.64% of the International market, compared to 76.06% one year before. As of May 2008, VARIG held 7,97% of the Brazilian domestic market and 16,68% of the international market.

Destinations

Fleet

Current

The Varig fleet consists of the following aircraft as of September, 2008: [ [http://www.ch-aviation.ch/airlinepage.php?code1=VRG CH-Aviation] ]

Retired

Aircraft retired due to financial crisis in June 2006:
*Boeing 737-400/500/700/800
*Boeing 757-200
*Boeing 777-200/ER
*McDonnell Douglas MD-11Previously retired aircraft:
*Airbus A300B4
*Boeing 707
*Boeing 727-100
*Boeing 737-200
*Boeing 747-200/300/400
*Boeing 767-200ER
*Douglas DC-3
*Douglas DC-6
*Douglas DC-8-33
*McDonnell Douglas DC-10-30
*Convair 240
*Convair 990
*Lockheed L-1049 Constellation
*Lockheed L-188A Electra II
*NAMC YS-11

Rio-Sul and Nordeste retired aircraft:
*737-300/500/700
*Embraer EMB-110
*Embraer EMB-120
*Embraer ERJ-145
*Fokker F-27
*Fokker 50

Incidents and accidents

Since 1962:
*27 November 1962, Flight 810, near Lima, Peru, crashed into a mountain after missing the approach to the airport while repeating the approach. 97 fatalities.
*11 July 1973, Flight 820, near Paris, France, made a forced landing due to fire in a rear lavatory. There were 123 deaths and 11 survivors (10 crew, 1 passenger). The aircraft landed 5 kilometers 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 as Flight 820, disappeared 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 by the Japanese Brazilian artist Manabu Mabe, worth USD 1.24 million.
*3 January 1987, Flight 797, near Abidjan, Côte d'Ivoire. Crashed after an engine failure, 50 deaths, 1 survivor. The Boeing 707 took off in its last Varig flight to Rio. The plane hit the ground with 3 survivors. Two of those survivors died minutes later.
*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. The aircraft overran the runway and hit some trees while landing in bad weather. The first officer died on impact, the 51 others on board survived.

References

External links

* [http://portal.varig.com.br/us/varig/index_html Varig]
* [http://www.varig.com Varig in the world]
* [http://www.icarobrasil.com.br/ Revista VARIG inflight magazine]
* [http://bankrupt.com/varig.txt Varig Bankruptcy News, Issue 1] , June 18, 2005