Brazil Varig’s Situation Much Worse Than Expected, Says Expert

Professor Ricardo Teixeira, a Brazilian expert in business administration at the Fundação Getúlio Vargas, says that based on statements by Varig Airline employees he believes the present situation in the company is "much worse than it seemed to be in the past."

Teixeira says things have reached the point where passengers are afraid to buy Varig tickets even though many flights are leaving on schedule.

As for the future of Varig, Teixeira points out various scenarios: if the investment group, NV Participações, manages to make the mandatory deposit of US$ 75 million today that means that the June 8 auction will be valid and Varig workers (represented by NV Participações) will take over.

"If the mandatory deposit is not made a new auction may be necessary. The big problem with these auctions is transparency. Especially the rules regarding company liabilities [Varig has debts totaling over US$ 3 billion]."

Another possibility is for the Brazilian government, through its state-run fuel distributor and airport administrators, to continue to be generous with Varig, allowing the debt-ridden firm to continue to operate.

Teixeira emphasizes that the Varig trademark is one of the company’s most valuable assets but that something must be done rapidly to protect it. "If it is not preserved quickly, it may lose its value."

Agência Brasil

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