• Categories
  • Archives

Brazil: Bankrupt Varig Airlines Goes to Auction But Nobody Wants It

NV Participações, a consortium led by workers of Brazilian Varig Airlines was the only group to bid for the bankrupt company when it went on auction this Thursday, June 8.

Even though the minimum price stipulated by the auction was US$ 860 million, NV Participações offered only US$ 449 million or 1.01 billion reais. From this total only US$ 128 million would be paid in the cash. The rest would come in form of debentures and participation of future profits.

The offer is for the whole of Varig, with its domestic and international routes. Judge Luiz Roberto Ayoub will have until Friday, June 9, to decide if the bid is valid.

In the first phase of the auction no one placed a bid for at least the minimum US$ 860 million. In the second phase, when smaller bids were allowed, only NV Participações had anything to offer.

Other groups participating in the auction, TAM, Gol, OceanAir and Céu Azul, representing the American investment fund Brooksfield, had nothing to offer.

For Milton Zuanazzi, director of Brazil’s National Agency of Civil Aviation (ANAC), Varig’s auction hasn’t finished yet.  According to him, nothing will happen before judge Ayoub makes his decision.

Ocean Air’s president, Carlos Ebner, said that his company didn’t make any offer because there was very little time to arrange all the financial details before the auction.

Varig, which once was the most important Brazilian Airline, due to mismanagement has been accumulating deficits for the last two decades. Today the company is deep in debt owing more than US$ 3 billion, 65% of which to the Brazilian government.


  • Show Comments (9)

  • A. Grant Smith

    Retiree from Aircraft manufacturer’s service group.
    Without more details on causes for Bankruptcy, this whole Varig thing sounds like what I saw happening to Eastern. Sent there just over two months by the plane manufacturer to assist with AD confirmations, the Eastern personnel on the shop floors at Atlanta were so infuriated at the airline CEO they were constantly in a “destroy him” thinking mode. Work output was very low, particularly on the night shifts. Sure enough, as we expected, Eastern went down!

  • Serge

    I see history repeating itself in the Employee buying Varig of Brazil. I saw it in Eastern and Pan American. The employees stepping up to save the ariline and their employment only to see everything, and I do mean everything lost. As far as TAM buying Varig to expand its International servicew – proceed with caution. Pan Am did the same when it bought National to increase its feeder traffic for its international service. Only to late to discover running a domestic airline is not the same as running an airline with a first class reputation. I commend the employees of Varig and believe me I know where they are at and where they are coming from. I was a FA/Chief Purser with Pan Am for 24yrs before being bought out buy another US Airline. After 36yrs of flying I know what their motivation was.

  • Guest

    varig needs no enemy with such friends
    yeah folks,
    So wise are you’all. All business and no feelings. That is why the employees were biding on varig. For the sake of saving. after all it has 120000 employees.
    But where are the brasilians living abroad with a lots of cash and great desire to keep Santos Dumont and Brazil from morning it’s ” star board service airlines” ?
    Olha ai, isso faz pena
    Helenisa Coutinho

  • Guest

    The routes
    I was thinking more like a company like TAM might buy Varig, take the routes since they are expanding internationally, merge whatever operations make sense, and then shut the rest of Varig down.

  • Guest

    The Debt
    (I’m the first poster).
    The bankruptcy judge is telling buyers that they will be free from ALL debt. But, the confusion appears to be that that may be in conflict with the newest BK laws in Brazil.
    I was referring to $50M with absolutely no debt. You are buying the routes. But which are profitable?
    The previous poster mentions the international routes – but if Varig competes with American Airlines on the large Brazil-US routes, I’ll bet on American – even though I personally prefer to fly Varig. American has very stong management.
    I doubt Varig owns any of their aircraft but if they do, it would probably be only the oldest, most inefficient ones.
    To succeed they need a new fuel efficient fleet, less employees and cheaper ones, strong management and Cash to try to rebuild the business. I doubt an employee buyout would bring any of those things.

  • Guest

    Buying Debt
    Unless the billions of dollars/real debt is removed this deal has issues even at half the cost. The Real issue is if the old habits do not change, then the new Varig’s owners will fall into the same debt. I’d like to understand what were the 3 – 5 major reasons (outside of fuel) causing this company to go bankrupt. Will the new owners have the proper cash flow to keep the airline afloat? How will the government handle the debt already owed? Unless the new leaders draw a line in the sand everything will repeat it’s self.

    acommonthought (bobby- Chicago)

  • Guest

    Varig’s most valuable assets are its international routes. These can be quite valuable to the right company.

  • Guest

    An American
    The above poster makes lots of good points. Why pay huge sums of money to buy a money losing business. With tough competition from TAM and GOL and very high fuel prices, it would be very difficult for Varig to every make money and very easy for Varig to continue losing money.
    It would be much easier to put your money into a bank and make money from the interest than to buy Varig and try to make money operating an airline.

  • Guest

    $850M Crazy! $450M Still too much!
    When I read the starting price of $850M recently I thought the court was crazy. Now I believe it’s the employee group who’s crazy.
    What are they buying exactly? With only 16% of the domestic market an investor would be better of going after GOL or TAM!
    Buying Varig won’t save their futures. It will only prolong the agony.
    To survive, Varig needs a buyer who pays $50M and can slash 5000 employees and start fresh with the remainder. Who has the fortitude for that?

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.


You May Also Like

The Shock & the Dream

By Brazzil Magazine THE POWER OF KNOWLEDGE The first wonder of the end of ...

Painting favela in Brazil

If the End of Apartation is Impossible Then Brazil Is Impossible

At this beginning of the century, no ideological map exists, only ruins of "isms." ...

Brazilian airline TAM

The Lan-TAM Alliance Will Make Travel Easier in Brazil and Chile

Brazil's TAM Linhas Aéreas and Lan Chile, both airlines with a clear dominating position ...

Brazil’s Vivo Teams Up With ReCellular to Save Cell Phones from Trash

US-based ReCellular, an international collector, reseller and recycler of used wireless cell phones and ...

Former Brazilian Justice Minister Hired to Defend US Pilots Involved in Boeing Crash

ExcelAire, the American company that bought the Legacy jet, the aircraft that ended up ...

Brazil-UNESCO Cooperation Celebrated in Paris

An exhibition presenting the work accomplished by UNESCO in Brazil over several decades will ...

UN Environment Effort to Involve 10 Million Brazilians

The preparation for Brazil’s II National Youth Conference on Environment starts next June 5th, ...

A sample of banaplac from Brazilian micro firm

Bananaplac, a Brazilian Answer to Formica

The production of alternative materials to hardwood in communities that plant banana and pupunha ...

Interest Hike Depresses Brazilian Stocks

Latin American shares were mostly mixed on the session, as traders were hesitant to ...

Brazil Refuses to Pay for Those “Who Turned World into Giant Casino”

Brazil's President, Luiz Inácio Lula da Silva, said during his visit to India that ...