AF086
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LAN Injects Money Into Varig

Thu Feb 01, 2007 1:38 am

This just came up. LAN has injected US$ 17,1 million into VARIG (the new one) and might become a shareholder of the company.

Here's the full article by Reuters - Latin American Edition (spanish only)

[Edited 2007-01-31 17:38:51]
Please insert a "smart" joke here.
 
PDPsol
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RE: LAN Injects Money Into Varig

Thu Feb 01, 2007 2:01 am

Wow, this is big news for the aviation sector in Brasil. LA has vast experience with operating subsidiaries in regional countries; experience that will very valuable should they convert this USD 17 million into a direct equity stake in RG.

However, there is one caveat here. RG's parent company is VarigLOG, which, in turn, is already 20%-owned by a foreign entity; the US investment fund, MatlinPatterson.

Should LA convert its debt into VarigLOG equity, it may create an issue with Brasil's 20% foreign ownership threshold. It appears, however, that LA's investment is in RG directly, not in the parent company.

Nonetheless, very interesting news given all the dramatic changes currently ocurring in the Brasilian commercial aviation sector.
 
PDPsol
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RE: LAN Injects Money Into Varig

Thu Feb 01, 2007 2:06 am

Additional post:

Having read LA's press release, the Chilean carrier is investing directly in RG, not the parent, VarigLOG. This makes much more sense.

RG is the "new Varig" that acquired the carrier's operating assets and routes during last year's bankruptcy process.

The market has responded very favorably to this news, with LA shares on the NYSE up over 5% today.
 
EMB195ER
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RE: LAN Injects Money Into Varig

Thu Feb 01, 2007 8:51 am

I see Varig saying good bye for StarAlliance forever and joining One World soon!!!
 
EMB195ER
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RE: LAN Injects Money Into Varig

Thu Feb 01, 2007 8:51 am

I see Varig saying good bye for StarAlliance forever and joining One World soon!!!
 
eraugrad02
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RE: LAN Injects Money Into Varig

Thu Feb 01, 2007 9:19 am

Maybe Varig will order some 767s. Who knows. lol...
Desmond MacRae in ILM
 
Viscount724
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RE: LAN Injects Money Into Varig

Thu Feb 01, 2007 9:24 am

It sounds like LA may have plans to convert RG into LAN Brazil, like their current LAN Argentina, LAN Peru and LAN Ecuador operations which are legally separate companies with majority ownership in the 3 countries concerned to comply with legal requirements etc., but for marketing purposes are promoted as virtually one carrier along with LAN itself in Chile.

Sounds like a very smart move to me as LAN can establish a sigificant presence in the Brazil market at lower cost than starting a completely new carrier. Will be interesting to see how this develops.
 
zschocheimages
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RE: LAN Injects Money Into Varig

Thu Feb 01, 2007 9:39 am

Good for both of them. It is great to see RG get a new beath of life.
Why fly with 2 engines when you can have 3?
 
LipeGIG
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RE: LAN Injects Money Into Varig

Thu Feb 01, 2007 10:22 am

Quoting AF086 (Thread starter):
This just came up. LAN has injected US$ 17,1 million into VARIG (the new one) and might become a shareholder of the company.

Good move for LA, i can't remember a loan that produced a 5% increase on share price... just the valuation for today paid the loan!!!
Expect that it could also help new Varig to develop itself (and also to obtain more widebodies)

Felipe
New York + Rio de Janeiro = One of the best combinations !
 
kiwiandrew

RE: LAN Injects Money Into Varig

Thu Feb 01, 2007 3:59 pm

OW already has a frightening level of dominance in Latin America with LAN Chile , Peru and soon Argentina and one other ( Ecuador , I think ? ) together with AA from North America and IB from Europe - if RG becomes LAN Brasil it really will be very difficult for either of the other alliances to gain ground - the rest of Star Alliance must be cursing SK for divesting themselves of their stake in LA several years ago
 
zvocio79
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RE: LAN Injects Money Into Varig

Thu Feb 01, 2007 4:14 pm

Quoting LipeGIG (Reply 8):

Good move for LA, i can't remember a loan that produced a 5% increase on share price... just the valuation for today paid the loan!!!
Expect that it could also help new Varig to develop itself (and also to obtain more widebodies)

Felipe

I told you LipeGiG, before Varig joins One World, there will be a LAN Brazil.
 
EMB195ER
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RE: LAN Injects Money Into Varig

Thu Feb 01, 2007 6:20 pm

I don't think they will change Varig's name. Varig is stronger in Brazil than a possible LAN Brasil.
 
CXfirst
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RE: LAN Injects Money Into Varig

Thu Feb 01, 2007 6:26 pm

If Varig did change their name into LAN Brasil, would this help in getting internaltional passengers as the LAN brand is stronger than Varig internationally.

Quoting EMB195ER (Reply 11):
Varig is stronger in Brazil than a possible LAN Brasil.

Couldn't the Brasil part bring in a lot of potential passengers from Brazil. I don't see this as much less numbers of passengers.

-CXfirst
 
JJMNGR
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RE: LAN Injects Money Into Varig

Thu Feb 01, 2007 9:26 pm

Seems to me a stupid move if the intention is to turn VARIG into LAN BRASIL. They are not using their minds.

The own ABSA and ABSA is an airline with authorization to carry cargo and passengers. Much more easy for them to invest in ABSA now as a pax airline.
 
AF086
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RE: LAN Injects Money Into Varig

Thu Feb 01, 2007 9:26 pm

Quoting CXfirst (Reply 12):
If Varig did change their name into LAN Brasil, would this help in getting internaltional passengers as the LAN brand is stronger than Varig internationally.

Disagree. VARIG's brand is known worldwide not like LAN. And also one of the VARIG''s best assets is it's brand so I guess that LAN wouldn't just throw it away. Remembering that LA has a large part of brazilian cargo airline Absa and they didn't change it's name to LAN Brazil Cargo or anything like it.

The difference between LAN Argentina and VARIG is that LAN Argentina was built from zero different from a possible LAN takeover at VARIG that has a stablished brand (and a valuable one).

Quoting EMB195ER (Reply 11):
I don't think they will change Varig's name. Varig is stronger in Brazil than a possible LAN Brasil.

Agree.
Please insert a "smart" joke here.
 
Brasuca
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RE: LAN Injects Money Into Varig

Thu Feb 01, 2007 9:34 pm

Quoting CXfirst (Reply 12):
If Varig did change their name into LAN Brasil, would this help in getting internaltional passengers as the LAN brand is stronger than Varig internationally.

No it isn't. LAN is of course better known around Spanish Latin America and Australia than VARIG is. But as far as Europe and North America are concerned VARIG is no doubt a stronger brand than LAN has ever been.
Varig, Varig, Varig
 
RJ_Delta
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RE: LAN Injects Money Into Varig

Thu Feb 01, 2007 11:18 pm

The money injected by LAN is a type to starts its way to introduce in the Brazilian markets. Since a couple years ago, LAN has looking the brazilian market to start a subsidiary there. However the Brazilian allows only the 25% of foreing investment in a national company. Also LAN today has a internal limitations to start a new company, like a very limited fleet with demands to place a orden of new aircraft very soon, and a not consolidate LAN Argentina.

Since the end of 2005, LAN Airlines has designed a few routes to start a LAN Brazil in the future or when exist betters conditions. They includes destinatios as Rio de Janeiro, Porto Alegre, Belo Horizonte, Curitiba, Florianopolis, Brasilia and Salvador Bahia.
 
bongo
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RE: LAN Injects Money Into Varig

Thu Feb 01, 2007 11:39 pm

One World´s LAN Brasil, hummm...sounds nice!
MDE: First airport in the Americas visited by the A380!
 
PEET7G
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RE: LAN Injects Money Into Varig

Fri Feb 02, 2007 12:07 am

Great move by LAN if done smartly! Excellent entry point to the Brazilian market, however I wonder what will happen with the branding... LAN Brazil would be a logical and unifying choice, but as stated before me VARIG is a well established brand all over the world.

Even to me (who knows more of the many shameful troubles of the dieing VARIG) it is a brand of good memories and wonderfull flights taken with them in the late 80's and early 90's... nothing beats those days...jumpseating on their DC10's... man, do I miss those days!!!  hissyfit 
Peet7G
 
AwysBSB
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RE: LAN Injects Money Into Varig

Fri Feb 02, 2007 2:04 am

At least ANAC has not received any official solicitation for a partnership Varig-LAN yet.
I hope that partnership does not succeed and Varig finds good Brazilian investors.
 
BA787
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RE: LAN Injects Money Into Varig

Fri Feb 02, 2007 2:13 am

Good news for LAN. I hold the view that they are the best Latin American carrioer by far, so any expansion is excellent


As for Varig rebranding etc, doubt it will happen. Varig has a very well recognised brand image and is a well respectyed airline. LA is also well respected, but doing a TUIfly type thing wouldnt be great for RG, they have a loyal following which LA wont want to compromise. Still watch this space, I see a bigger investment in the near future, I don't think VARIGLOG will and ever were in it for the long-haul
 
PDPsol
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RE: LAN Injects Money Into Varig

Fri Feb 02, 2007 2:19 am

Quoting AwysBSB (Reply 19):
Varig finds good Brazilian investors

What's wrong with a good Chilean investor like LA? LA has vast experience operating affliates in the region and could turn RG into a wonderful domestic and international carrier.

Brasil's financial markets [and Chile for that matter] are flush with investment capital right now and I have no doubt local private investors would express interest in RG should it produce a viable business plan developed by an experienced strategic investor, such as LA.
 
blsbls99
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RE: LAN Injects Money Into Varig

Fri Feb 02, 2007 2:36 am

I thought I had read somewhere that Varig was going to be rebranded as Nordeste?
319 320 313 722 732 733 735 73G 738 739 742 752 763 772 CRJ D9S ERJ EMB L10 M88 M90 SF3 AT4
 
AwysBSB
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RE: LAN Injects Money Into Varig

Fri Feb 02, 2007 2:56 am

Quoting Pdpsol (Reply 21):
What's wrong with a good Chilean investor like LA?

I would not like to see RG's network being conditional to LA's network. 4M, LP and XL have given up some growth opportunities because of LA's network limitations.
Furthermore, Latin American air market needs more competition, not consolidations!

Quoting Blsbls99 (Reply 22):
I thought I had read somewhere that Varig was going to be rebranded as Nordeste?

That was a press' mistake.

[Edited 2007-02-01 19:12:36]
 
RJ_Delta
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RE: LAN Injects Money Into Varig

Fri Feb 02, 2007 3:35 am

It's possible that in the near future we'll see a Varig as an associate airline to LAN 's network, not a subsidiary as LAN Peru, LAN Ecuador or LAN Argentina.

Now if LAN participates as a Varig shareholder, LAN will acces to request permission as a brazilian national carrier, similar as LAN Cargo is doing with Absa Cargo.
 
Wazobia
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RE: LAN Injects Money Into Varig

Fri Feb 02, 2007 4:39 am

Quoting RJ_Delta (Reply 24):
Furthermore, Latin American air market needs more competition, not consolidations!

As some one who books groups space to Brazil I have seen our cost greatly increase and service decrease since Varig stopped flying to the US. I hope this will let Varig return to the US market for that reason alone. Do you think that this will speed up the process for them to return sooner? Even if its not Varig any increased in flights would be welcome.
 
LipeGIG
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RE: LAN Injects Money Into Varig

Fri Feb 02, 2007 8:39 am

Quoting Zvocio79 (Reply 10):
I told you LipeGiG, before Varig joins One World, there will be a LAN Brazil.

IMO, you're right about LAN Brazil, but i don't think that it will be thru Varig.

Quoting CXfirst (Reply 12):
If Varig did change their name into LAN Brasil, would this help in getting internaltional passengers as the LAN brand is stronger than Varig internationally.

Disagree, Varig brand is stronger in Brazil and is where they always get mostly of their revenues. Lan brand could help in MIA, JFK, MEX, LIM, MAD, but what about CDG, MXP, FRA, LHR, AMS, MUC ?

Quoting JJMNGR (Reply 13):
The own ABSA and ABSA is an airline with authorization to carry cargo and passengers. Much more easy for them to invest in ABSA now as a pax airline.

You're 100% right, and it's where LA should begin an airline, from zero and with same fleet as the others (i.e. Airbus).

Quoting AF086 (Reply 14):
The difference between LAN Argentina and VARIG is that LAN Argentina was built from zero different from a possible LAN takeover at VARIG that has a stablished brand (and a valuable one).

Agree 100%, and also, LAN runs flights in Brazil only to FLN, GRU, GIG and SSA. They do not keep a strong brand in the other markets, even those 4 become closer to 65% of the market

Quoting RJ_Delta (Reply 16):
The money injected by LAN is a type to starts its way to introduce in the Brazilian markets

RJ_Delta, they do not inject money, the extend a loan. They have the option to convert the debit into shares, but it's just an option.

Felipe
New York + Rio de Janeiro = One of the best combinations !
 
zvocio79
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RE: LAN Injects Money Into Varig

Fri Feb 02, 2007 5:55 pm

Guys from Brazil are been nationalist instead of rational.....you can say Varig was bigger than LAN and serviced more cities, but you can’t never say that they were better. Varig's goal was to flight only; LAN's goal is to be top 10, not in fleet size, but quality and service. Varig cannot do it on its own and LAN can be the partner they need to emerge. God knows, may be LAN wants to do what South West did with ATA and exchange some of their gates or routes somewhere........all we can do here is speculate, no more.

Pd. I should’ve bought my self some stocks from LAN 3 years ago, when they were only $7 bucks in Wall Street.
 
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acontador
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RE: LAN Injects Money Into Varig

Fri Feb 02, 2007 9:36 pm

I can see quickly a new Varig rising from the ashes. I suspect they will keep the brand name, but in all other terms it will become a LAN Brazil. Maybe on the planes they will put something like 'LAN Airlines group' on small letters, right next to the One World logo?  Wink
LAN is very strong on flights from SCL to both GIG and GRU, so it looks just logical that they can 'extend' these flights to all over the world and within other Brazilian destinations through Varig's network. That way LAN can expand very easily for example their Europe network, that now only goes to MAD and FRA (so you could fly SCL via GRU to LHR...).
All this move makes a hell of a lot of sense to me, and our Brazilian friends should put their reservations one minute aside and think what is really best for their country: A half dead and lingering Nordeste that cannot compete effectively with TAM and GOL, or a strong Varig backed up by LAN? I think the answer is quite obvious...
Just sit back, relax and have a glass of Merlot...enjoy your life!
 
FMAL
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RE: LAN Injects Money Into Varig

Fri Feb 02, 2007 10:01 pm

I read this "option" to convert the loan into Varig's stock as a way for LAN to wait out the possible change in Brazilian Legislation authorizing larger participation of international investors in Brazilian airlines.

How long is this option good for? What's its effectiveness period?
 
gemini573
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RE: LAN Injects Money Into Varig

Fri Feb 02, 2007 11:32 pm

Quoting Zvocio79 (Reply 27):
Pd. I should’ve bought my self some stocks from LAN 3 years ago, when they were only $7 bucks in Wall Street.

Yeah, look at where they are now? $63.00 a share!!! They are definitely doing something right. I bought some at $33.00.
 
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United787
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RE: LAN Injects Money Into Varig

Sat Feb 03, 2007 5:42 am

Assuming Varig becomes Lan Brasil or something similar and joined OneWorld, what would happen with TAM? Could Star Alliance pick them up?
 
WA707atMSP
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RE: LAN Injects Money Into Varig

Sat Feb 03, 2007 6:11 am

Quoting United787 (Reply 31):
Assuming Varig becomes Lan Brasil or something similar and joined OneWorld, what would happen with TAM? Could Star Alliance pick them up?

TAM has said they don't want to join an alliance at this point. If they do join, I think they're more likely to join Sky Team, because of their ties to AF, and CO/DL being stronger in Latin America than UA.
Seaholm Maples are #1!
 
SAOAP
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RE: LAN Injects Money Into Varig

Sat Feb 03, 2007 10:35 am

Quoting Acontador (Reply 28):

Not all Brazilians think this is a bad move... I for one think this is the best thing that could happen and could lead the way for the consolidation of LATAM civil aviation. LAN is by far Latin America's best airline - in my view - and a marrige to Varig might clear the path for Brazil. I haven't studied the aviation outside of Brazil much, but, since the 'disapperance' of Varig from the Brazilian market, things have been going down-hill in Brazil - at the moment the market is being run by foreign airlines (i.e. all the money is going elsewhere and not staying here as it should be). And, quite honestly, even with TAM and Gol on the rise, I don't see them taking up the fight - they simply don't have the infra-structure nor the experience (something which will certainly come with time as some of the latest results reflect). With all its problems, Varig still managed to hold the flag. Now, under new ownership, with a new steering and a well-thought partnership with LAN, things could be looking up again. And, as I said, a smart move for LAN who will be strong in all major South American markets: Argentina, Brazil, Chile, Ecuador, Peru, etc. Hope this works out for both LAN and Varig - it certainly brings back a lot of hope for the future!

Happy Landings!
"When it's dark enough, you can see the stars" - Charles A. Beard