erikwilliam
Posts: 2122
Joined: Fri Mar 12, 2004 12:30 am

Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 4:53 am

Varig wins the judicial battle against the Brazilian Government for the price control on tickets between 1985-1992. The total of losses that RG is due is about R$2bilion (USD700milion) and will give RG a new breath to survive.
The total of RG debts is around USD2,5bilion.
The amount of the debt owned to the government, in airport taxes, use of airport space and etc etc will be deducted from what Varig owns, the rest of it is under renegotiation with companies like GECAS and Boeing, among as lot others.

PS.sorry for the poor translation, bit in a hurry.

That´s good news for RG, they´re still a rally bad shape, but this can give them a new air to continue their work to profit land.
JJ and VP have similar trials, but not with the same amount.

VP is everyday worse, and now reduced to 18 flights a day.

That´s all the news I have for now.

C´ya
Dida, Cafu, Lucio, Roque Junior, Roberto Carlo, Emerson, Ze Roberto, Ronaldinho, Kaka, Adriano, Robinho, Ronaldo
 
erikwilliam
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RE: Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 4:59 am

ehehehe

sorry, here´s the link, portuguese only.

http://www1.folha.uol.com.br/folha/dinheiro/ult91u91668.shtml
Dida, Cafu, Lucio, Roque Junior, Roberto Carlo, Emerson, Ze Roberto, Ronaldinho, Kaka, Adriano, Robinho, Ronaldo
 
JoFMO
Posts: 1840
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RE: Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 7:21 am

2,5 million - 2 million = 0,5 million

Do I see it right that their debt had reduced to one fifth?
 
PPVRA
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RE: Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 7:29 am

Erikwilliam,

I hope the government continues with the restructuring program... or at least get rid of the problematic Rubem Berta Foundation (don't care how, just do it).

JJ and VP have similar trials, but not with the same amount.

In my opinion, VPs situation is so ridiculous that the government should delay their lawsuit so that they fold before... It's very sad, VP is Brazil's second oldest airlines, but Mr. Canhedo took them into such a bad situation...

JJ deserves it too, but that will probably take much longer for them, and it's been like this for a looooong time...

PPVRA
"If goods do not cross borders, soldiers will" - Frederic Bastiat
 
hardiwv
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RE: Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 7:37 am

Lets puts some order in the numbers here:

RG debt: R$7 billion = USD2.6 billion
RG court victory: R$2 billion = USD 700 million

RG current debt: R$5 billion = USD1.9 billion

The Court was considering this RG's case against the Government for at least 8 years. It was a very difficult decision, which took a lot of time. Finally, the Supreme Tribunal came with a decision and gave victory to RG.

Transbrasil also won the same case against the Government before it went bankrup. TAM and VASP also are expected to win their case in the Court. However, RG is by and large the biggest beneficiary.

It was a "clean" victory for RG. The problem is that they simply wont get any cash, because the Government is the main creditor of RG (PETROBRAS, Bank of Brazil, and the National Airport Authority). RG still has a huge debt with theGovernment.

The Government said it will appeal from the decision.


---------

Here is the information, published BEFORE THE FINAL DECISION OF THE SUPREME COURT, WHICH HAPPENED JUST HOURS AGO.

Brazil's second highest appeals court has postponed a ruling on a multimillion dollar compensation claim by Varig after a judge asked for more time to consider the case on Tuesday.

Heavily indebted Viacao Aerea Rio-Grandense (Varig) claims the government owes it about 2 billion reais to cover losses resulting from a freeze on the price of its fares from 1985 to 1992. It launched the claim in 1993.

The ruling, which could ease Varig's severe cash crunch, was postponed by the supreme justice tribunal after judge Teori Albino Zavascki requested more time to make a decision.

But before Zavascki requested the suspension, Luiz Fux, the head of the court, voted in favor of Varig's claim. Fux had stalled proceedings in May with a request for more time.

Fux's vote means two out of the tribunal's five judges have backed Varig's claim. Three votes remain to be cast.

The court set no new date to resume its deliberations.

The government faces similar claims from other airlines, including leading domestic carrier TAM;, Vasp, Nordeste, and Cruzeiro do Sul, totaling some 7 billion reais, according to the tribunal's calculations.

Some observers had hoped a ruling in favor of Varig would give new impetus to its talks with rival TAM to widen a flight sharing agreement into a full blown merger, a move that has been long encouraged by some in the government.

The net debt of Varig, a Star Alliance member, totals about 6 billion reais. The government and state companies, including airport operator Infraero and oil company Petrobras, hold more than two-thirds of the debt.

Varig has been driven to the brink of collapse in recent years as competition intensified and successive depreciations of Brazil's currency magnified its dollar-denominated fuel, aircraft leasing, and debt costs.

Last week, Carlos Wilson, the head of Infraero, said Varig was "practically state-owned" because the government was not executing its debts.

On Friday Brazilian Finance Minister Antonio Palocci scotched hopes of a state rescue package when he said the government would not inject funds into the airline.








 
PDPsol
Posts: 1111
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RE: Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 7:44 am

JoFMO,

No you are mistaken. The verdict would require the State to give RG BRL 2 billion, or USD 725 million (USD 1.00 = BRL 2.75).

So, wiping out USD 725 million of debts RG has with various government agencies (Infraereo, BNDES, etc.) would go a long way towards resolving RG's nightmarish financial problems, but would not completely save the Company.

Also, I read today Euro Atlantic and LAN are in discussions with BNDES (Brazil's development bank) to acquire control/invest in RG.

The soap opera continues...
 
hardiwv
Posts: 4341
Joined: Sat Oct 09, 2004 11:30 pm

RE: Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 7:54 am

Also, I read today Euro Atlantic and LAN are in discussions with BNDES (Brazil's development bank) to acquire control/invest in RG.

You can be sure that after this court victory there will be many candidates for VARIG. Last week the CEO of the Portuguese group "Pestana" (which has a hotel chain in Brazil) said his group was interested in VARIG. There is a report on Pestana Group's interest in VARIG included in Latin Finance Magazine. Pestana's CEO had a meeting with the head of the National Development Bank so as to agree the possible conditions of a Government financed loan.

Other airlines interested in VARIG: TAP, TAM, LH, LAN.

In my point of view the Pestana Group has a good chance, especially because they have close ties with TAP (if I'm not mistaken, they have a 30% share in TAP).

The "soap opera" just started!

Rgs,
 
PDPsol
Posts: 1111
Joined: Fri Feb 20, 2004 5:09 am

RE: Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 8:01 am

Hardiwv,

Euro Atlantic is a small airline OWNED by Portuguese tourism company Grupo Pestana; they are one and the same.

Yes, I completely agree with you: the soap opera has just begun!!!
 
hardiwv
Posts: 4341
Joined: Sat Oct 09, 2004 11:30 pm

RE: Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 5:36 pm

HERE ARE THE NEWS: Varig stock jumped nearly 34 percent

BRASILIA, Brazil, Dec 14 (Reuters) - A Brazilian court on Tuesday ruled in favor of a compensation claim filed by the debt-ridden flagship airline Varig against a government freeze on tariffs between 1985 and 1992.

Varig stock jumped nearly 34 percent to 1.75 reais following the decision which some traders have bet could earn the debt-ridden airline a sizable windfall. Brazil's benchmark Bovespa stock index was up about 1 percent at the time.

Some believe the decision could earn the airline a sizable windfall, although the government can appeal the ruling.

It was not immediately clear whether Varig would win any money in the case, but the airline shares have risen in the past on bets it would earn a large payout.

A lawyer representing the airline said the claim totaled close to 2 billion reais ($723 million), a sum that would help ease part of Varig's crippling debt load, which totaled 6.5 billion reais at the end of September.

Bankrupt former rival carrier Transbrasil won 725 million reais in a similar compensation case against the government in 1999, but it was not enough to keep the airline flying. Transbrasil was grounded in 2001 after running out of cash.

A rise in demand for air travel as Brazil's economy recovered this year has helped business improve. Brazil's economy is expected to grow more than 5.5 percent this year.

Brazil's Civil Aviation Department says the number of passengers on domestic flights between the start of the year and end of November was 11.9 percent higher than over the same 11-month period last year and 7.7 percent higher on international flights.

Varig has managed to stay in business thanks in part to the flexible attitude of creditors in the public sector such as airport authority Infraero and oil company Petroleo Brasileiro (Petrobras).

Varig has also managed to save costs by cutting its fleet and sharing routes with rival TAM, although the government's antitrust body has studied whether it breaks competition rules. The two airlines have abandoned an earlier plan to study a full-blown merger of their operations.

---------------------

An by Portuguese tourism company Grupo Pestana is negotiating with Brazil's state development bank to buy a 20 percent stake in Brazilian flagship airline Varig.

Tomaz Metello, president of the Euro Atlantic charter airline, owned by Grupo PEstana, told Estado de S.Paulo newspaper he had given Brazil's National Economic and Social Development Bank (BNDES) a proposal under which Euro Atlantic would be in charge of running Varig.

He did not say how much Euro Atlantic was offering for the stake -- the largest a foreign group can legally own in a Brazilian airline.

"We are waiting for a position from the Brazilian government and a response from the BNDES. We already looked at Varig's numbers. Afterward there could be an audit," Metello was quoted as saying by O Estado de S.Paulo.

Chile's LAN airline, and Lufthansa has also shown interest in buying a stake in Varig, according to a source in the Brazilian government.

According to O Estado de S.Paulo, Euro Atlantic already has a partnership with Varig connecting flights from Brazil's northeastern coast to European destinations.

 
hardiwv
Posts: 4341
Joined: Sat Oct 09, 2004 11:30 pm

RE: Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 6:51 pm

Here you can see how close VARIG is to Euro Atlantic:

Photo 1: VARIG-Euro Atlantic charter sets off from AMS to NAT (1 x week, 767)
Photo 2: VARIG-Euro Atlantic lands in LIS arriving from FOR (2 x week, 767)


View Large View Medium
Click here for bigger photo!

Photo © Eduard Brantjes
View Large View Medium
Click here for bigger photo!

Photo © Marco M.



Euro Atlantic is owned by one of the biggest Portuguese private groups: Pestana. The group has an extensive hotel chain in Brazil, under the brand Pestana.

I think that, with this RG victory in the Courts, we are getting very close to a deal involving Euro Atlantic taking a considerable stake at RG.

Euro Atlantic would be responsible for the management of VARIG, and the Ruben Bertha Foundation, which currently controls VARIG, would see its stake reduced to only 5%.

I also think that there are strong indications that TAP CEO, Mr Pinto, will head the "new" VARIG.

Rgs,
Hardi
 
erikwilliam
Posts: 2122
Joined: Fri Mar 12, 2004 12:30 am

RE: Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 8:04 pm

PPVRA: Hte big problem, is that if nobody takes action, VP will continue in this...man, they´re even paying airport taxes with bouncing checks(mr.Canhedo personal), and they just have to pay R$40.000,00/day to Infraero. Quite ridiculous.
Transbrasil won, and were´s the money????Probably Mr.Cipriano used to reform his skiing complex in Colorado-USA. And besides that, Infraero can´t take their assets back from Transbrasil, like hangars, counters, office spaces, the court simply does not sets the trial, and Infraero has to wait, and wait.

So we see, Brazilian Air Scene continues to be a big big joke, and Tam and GOL, continue to suffer and suffer.

About RG and Rubem Berta, well, the situation is so so comlex, that we´ll see a LOT of talks and probably no action. Ruben Berta won´t give Varig up so easily and nobody will buy Varig with Ruben Berta putting its finger there.

JoFmo: Sorry man, I think u got the numbers a bit wrong. The total debt is 2,5bilion Dollars and Varig won 2bilion Reais which is 700milion dollars, so Varig reduced it´s debt by 1/3 not to 1/5 of what it was.  Big thumbs up

HArdi: As usual, your information adds a lot to us, just one thing about the money.
The genius people at the government thinks like this: Varig needed money from BNDES. Varig won money from Government. BNDES belongs to Government. So, there´s Varig money. Nice way of think isn´t it?!?!

Anyway, the situation is very complex, and will take a while to see some final solution, if any.

C´ya
Dida, Cafu, Lucio, Roque Junior, Roberto Carlo, Emerson, Ze Roberto, Ronaldinho, Kaka, Adriano, Robinho, Ronaldo
 
JJMNGR
Posts: 924
Joined: Wed May 26, 2004 9:06 pm

RE: Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 8:26 pm

Gentlemen, let´s put feet on the ground.

The amount Government has to pay to VARIG will not save the company. What must be in discussion is, the very bad company management. The more money they receive, the worse it is going to be spent!!!

Today´s early morning news on TV, some specialists (aviation industry, journalists, politicians, etc...) are saying exactly the same. There is no condition to VARIG keeping management like it is now and the solution for the company is a Governmental intervention.

This intervention would take FRB out of this business and keep jobs and operations, but giving the company to another management.
 
erikwilliam
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Joined: Fri Mar 12, 2004 12:30 am

RE: Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 8:37 pm

JJ: but, isn´t what we´re talking about???
Getting rid of Ruben Berta???

Indeed RG need new management, and that means, no FRB, otherwise we´ll see the thing as yesterday in 10 years from now.
Dida, Cafu, Lucio, Roque Junior, Roberto Carlo, Emerson, Ze Roberto, Ronaldinho, Kaka, Adriano, Robinho, Ronaldo
 
hardiwv
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Joined: Sat Oct 09, 2004 11:30 pm

RE: Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 9:14 pm

This intervention would take FRB out of this business and keep jobs and operations, but giving the company to another management.

Excellent summary. And as I said, this is exactly what Euro Atlantic is negotiating with BNDES.

Reg,
 
latinaviation
Posts: 1162
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RE: Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 9:40 pm

This morning's Wall St. Journal says Brazil will formally take over Varig on Friday, effectively kicking Ruben Berta out of management control. But it doesn't mention BNDES immediately selling the airline, to EuroAtlantic or otherwise. Perhaps the gov't will hold on to the airline for a while to clean up the books, maybe absorb some of the debt, to pretty it up for resale?
 
hardiwv
Posts: 4341
Joined: Sat Oct 09, 2004 11:30 pm

RE: Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 10:02 pm

Brazil's Government to Take Control of Varig Airline

This is now official!

[Edited 2004-12-15 14:20:28]
 
JJMNGR
Posts: 924
Joined: Wed May 26, 2004 9:06 pm

RE: Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 10:27 pm

Erikwilliam, yes it is what some are saying ...but some others are thinking that VARIG is safe as it has some credits...
Very recent news are saying that Goverment is going to assume the company control on Friday.
 
erikwilliam
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RE: Varig Wins Government Battle, What Now?

Wed Dec 15, 2004 11:19 pm

JJ: We´re saying the same thing, with different words,  Big thumbs up

fresh news is, Government will take over Varig, and that the decision was just a maneuver for the government to end this soap-opera, sell the company and save the brand, which for them, is the only International carrier of Brazil.

Latin: You´re probably right, they will hold the company, to ensure no bad thing will happen, and the right use of the money.

about BNDES, the bank is only being used in this issue, because it´ll probably guarantee resources to the buyer, so we can see the Government wanting to sell the company BUT, for a good buyer and make sure that this buyer have a good cash flow to run the company.

Bottom line and a personal note, I think the government will sell the company to whom they want, and use the BNDES to make sure the buyer and RG can have a good partnership. I see what´s happening as a way to help Varig, but without the government direct intervention, only because if that happened public opinion and other companies would want the same treatment, and probably the outcome wouldn´t be so good.
Dida, Cafu, Lucio, Roque Junior, Roberto Carlo, Emerson, Ze Roberto, Ronaldinho, Kaka, Adriano, Robinho, Ronaldo
 
hardiwv
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Joined: Sat Oct 09, 2004 11:30 pm

RE: Varig Wins Government Battle, What Now?

Fri Dec 17, 2004 5:41 pm

And the Government decided NOT to intervene in VARIG today, Friday.

The Minister of Defense, before taking any action, decided to have consultation with as many stakholders as possible, including various lobby groups.

No definition as yet what will happen with RG, but something is being prepared and will be released soon.

------------
Dec 16 (Reuters) - Brazil's vice president played down on Thursday a statement by the country's airport authority that the government had decided to take administrative control of Varig.

Asked if a government intervention was indeed on the cards, Jose Alencar said after meeting Congress members to discuss the Varig crisis: "No, I don't think so. We shall see."

Alencar also overseas the aviation sector in his capacity as defense minister .

On Tuesday, Carlos Wilson, president of the government-run airport authority known as Infraero, said Varig's controlling shareholder, the Ruben Berta Foundation of the airline's employees, must be removed from management and the Varig crisis will have a solution by Friday.

An intervention means that the government would take administrative control of the company and control its finances.

Earlier Tuesday, a Brazilian court ruled in favor of a compensation claim filed by Varig against a government freeze on tariffs from 1985-92 totaling about 2 billion reais ($725 million). The government can appeal.

Varig stock soared 70 percent.

A rise in demand for air travel as Brazil's economy recovered this year has helped business improve. Brazil's economy is expected to grow more than 5.5 percent this year.

 
EMB195ER
Posts: 253
Joined: Mon Sep 13, 2004 3:31 am

RE: Varig Wins Government Battle, What Now?

Sat Dec 18, 2004 7:04 pm

Guys,

I think we will not see any decision about RG future this year.

Our Vice President already said it will not take any action in December due to the high amount of people flying this month.

I believe this announcement maid by INFRAERO president was only a kind of warm up only to see how society would react to a public intervention at RG.

Hugs,

EMB195ER