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AP
Paper: Varig, TAP Negotiations Collapse
Monday June 20, 6:34 am ET
Negotiations Between Debt-Ridden Varig and TAP Collapse, Newspaper Says
LISBON, Portugal (AP) -- Negotiations between Brazil's flagship carrier Varig and Portugal airline TAP for a plan to rescue Varig from financial collapse have failed, TAP Chief Executive Fernando Pinto was quoted as saying in an interview published Monday.
"The operation has ended, although TAP is still interested in a partnership with Varig and will now see if it makes sense to apply the same kind of plan to the process," Pinto told the Diario Economico financial newspaper.
TAP representatives could not immediately be reached for comment Monday. Portuguese officials would not comment.
TAP and Varig had been discussing a plan under which Portugal's state-owned airline would invest an undisclosed sum in Varig and get a stake of up to 20 percent in the Brazilian carrier. The companies have overlapping trans-Atlantic routes between South America and Europe, and already have a code-sharing agreement on some flights. The two airlines would not have merged under the deal being discussed.
But Varig filed for bankruptcy protection on Friday to keep a restructuring plan on track and prevent 11 of its 82 jetliners from being seized by a division of American International Group Inc. The airline has debt of 9.5 billion reals (US$4 billion; euro3.2 billion) and has steadily lost domestic market share in Latin America's largest country over the last several years.
"The way that Varig has found to deal with its immediate cash flow problems is also an internal process that TAP cannot be a part of," Pinto added. He said TAP would further analyze its stance and follow the developments closely.
Varig, whose full name is Viacao Aerea Riograndense SA, had faced a Friday deadline to pay overdue leasing bills for the planes. The filing allows the carrier to keep using the jetliners while a judge mediates details of the airline's rescue plan with creditors, Varig lawyer Sergio Bermudes said.
Varig now has two months to present a recovery plan to creditors, Bermudes said, and will continue operating as usual.