Brazil’s Gol Hopeful Final Merger with Varig Will Bring Back Blue Skies

Two Gol planes surround Varig vessels Cade (Conselho Administrativo de Defesa Econômica – Administrative Council for Economic Defense), Brazil's antimonopoly agency, has finally approved the takeover of the once Brazilian flag carrier Varig by the low fare airline GOL, an operation which took place last year.

"The operation does not present anti competition effects," said the official release from the Cade office.

With the incorporation of Varig, Gol will now dominate 45% of the Brazilian air domestic market compared to the 49% of TAM, its main rival, according to the latest May data.

Varig, which for decades was Brazil's main airline in 2006 definitively went bankrupt and asked for protection from creditors after Brazilian President Luiz Inácio Lula da Silva's administration refused to grant the highly indebted company a support loan

In July 2006 the few assets of Varig were auctioned and acquired by the US fund Matlin Patterson which paid US$ 24 million. In March 2007, Gol purchased the fund's rights for US$ 320 million.

However taking over Varig has not been without problems for the once very profitable Gol low cost carrier.

"The only reason Gol is losing money is because the holding company reports include Varig which is the big money loser. Gol itself is still profitable," pointed out Robert Booth, chairman of US based consultancy AvGroup.

Gol Linhas Aereas Inteligentes SA posted a first quarter loss of 3.5 million Brazilian reais (US$ 2 million) after revenues of 1.6 billion reais (US$ 1 billion),reported President and CEO Constantino de Oliveira Júnior.

But in spite of the losses, Oliveira Junior said that Gol "remains committed to transparency and equality among all shareholders and the public".

The Cade approved the completion of the Varig acquisition by GOL Linhas Aéreas Inteligentes S.A. with no restrictions, allowing the Company to consolidate its passenger and cargo transportation.

"We are very happy to have received Cade approval, which will allow us to consolidate our investments and improve synergies between the airlines' operations," Oliveira Junior. 

"The addition of Varig will increase our network capacity and allow us to offer more convenient flight schedules, launch new routes and add service to new destinations, which will have a positive effect on the dynamics of the Brazilian aviation industry as a whole.  Most importantly, the acquisition will benefit our customers, who will now have access to more options in the market."

The acquisition of Varig, which was announced on March 28, 2007, and approved by the National Civil Aviation Agency (ANAC) on April 3, 2007, had already received favorable rulings from the Ministry of Justice's Secretary of Economical Law (SDE), the Ministry of Finance's Secretary of Economical Monitoring (SEAE) and Cade's Public Attorney.

Mercopress/Bzz

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