Being a Monopoly Contributed to Brazil’s Varig Airline’s Demise

If Varig is eventually declared bankrupt, passengers of the airline will suffer at least two unpleasant consequences within 20-30 days.

According to Ronaldo Seroa da Motta, coordinator of Market and Regulatory Studies at the Institute of Applied Economic Research (IPEA), the first will be the lack of accommodations on domestic flights for people who have already purchased tickets on Varig, "because there will not be enough seats available immediately on other airlines."

The other problem has to do with the World Soccer Cup. Motta pointed out that "people who have already bought tickets to Germany may suffer some difficulty finding seats on other flights headed there, and some will be surely be hurt financially."

He suggested planning as the way to minimize the problems that will occur in the transitional period, "which is what the government appears to be doing, with a concern for gathering information in order for it to be handled properly."

The economist said he believes that the other airlines will also be affected, trying to organize themselves to cover Varig’s routes. Despite the possible decrease in the number of flights offered, he declared his confidence in the tendency for the market to make room for new companies, including foreign ones.

Motta also said that he understands the concern that exists worldwide to avoid domination by a foreign company, because airlines are seen as an important part of a country’s defensive and offensive infrastructure at times when national sovereignty is threatened, such as in cases of war.

"Thus, it is important for local citizens to direct or own these companies," he affirmed, adding that, otherwise, nothing would prevent an intervention.

In the economist’s view, apart from these aspects, opening the airline market to international companies does not represent a problem.

"There would be more competition." In the last ten years, according to Motta, the airline sector in Brazil has evolved from a system dominated by a single firm, in other words, a monopoly, to a more competitive system.

"It is precisely this condition of possessing a monopoly that makes companies inefficient," he emphasized.

He explained that since they had been participating in the market for over 30 years, these companies had a large contingent of their workforce on the verge of retirement, posing an enormous actuarial (retirement benefits) risk.

The new companies, on the other hand, have less burdensome pension plans, allowing their costs "to be lower, for this very reason."

Agência Brasil

Tags:

  • Show Comments (3)

  • Guest

    Varig in a tail spin-bad debt,no gas!
    Latest reports say that the ‘Flag’
    carrier has no funds to pay ‘cash ‘ for aviation fuel- Petrobras supplies all other national airlines ‘on account’.Result-more grounded planes come Monday.
    No wonder nobody wants to buy an airline run by a faceless ‘foundation’.

  • Guest

    AK
    This blows! I have tickets to brazil for Dec.

  • Guest

    SSA
    It ould be a complete shame to see Varig go bamkrupt..

Your email address will not be published. Required fields are marked *

comment *

  • name *

  • email *

  • website *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Ads

You May Also Like

Made in Brazil: Rio Fashion Exports Grow 13%

The fashion industry in the southeastern Brazilian state of Rio de Janeiro consolidated its ...

Brazilian housewife Rosanita Nery dos Santos killed, cut and fried husband

Brazilian Who Chopped and Fried Husband May Have Been Ordered by Voodoo Priestess

Why did Brazilian Rosanita Nery dos Santos, 47, chopped her husband in over 100 ...

Abbas Ends Visit to Brazil Defending Peaceful Coexistence in Holy Land

Just before leaving Brazil after a visit to Salvador, Bahia, where he met Brazilian ...

Brazil Puts Its Goods on Show to Arabs

The economic potential of Brazil will be shown by different ministries and government institutions ...

Political Turbulence in Brazil Lowers Consumer Confidence Level

Brazilian Consumers’ confidence fell once again in July, according to the 20th Consumers’ Expectations ...

Brazil's Tribuna do Povo online

Again Arson Destroys Office of Brazil Newspaper that Denounced Corruption

A fire that swept through the offices of the fortnightly newspaper "Tribuna do Povo", ...

Brazil’s GDP Decelerates, But It Is Still Up 2.9%

In the first three months of this year, the total wealth produced by the ...

Brazil’s Domestic Tourism Campaign Pays Off: Flying Grows 16% in 2005

In November the number of Brazilians who traveled on domestic flights rose 21.1% in ...

Rape and the Basic Unfairness of Brazil’s Society

In late March, the brutal gang rape of an American tourist in a transit ...

Brazil and Russia Strengthen Technological Ties

Brazil and Russia are talking about creating a center for technology transfer in Brazil, ...