VARIG 777 seized by creditors at CDG

[GlueBall]

Associated Press
Creditors Seize Varig Plane in Paris
Friday January 31, 12:48 pm ET
By Alan Clendenning, AP Business Writer
AIG Division Seizes Varig Plane in Paris for Lack of Lease Payments


SAO PAULO, Brazil (AP) -- Varig, Latin America's largest airline, was trying Friday to negotiate the release of a Boeing 777 grounded at Paris' main international airport after it was seized by creditors.


The seizure for lack of lease payments to the jetliner's owner, a division of U.S.-insurance giant American International Group, is yet another sign of Varig's ongoing financial troubles. But the event marks the first time that passengers have been affected.

Passengers had been scheduled to fly Thursday on the plane from Paris' Roissy-Charles de Gaulle airport to Rio de Janeiro. After the jetliner was seized, they were instead put on an MD-11 heading from Paris to Rio with a stop in Sao Paulo.

Varig's two Boeing 777s are the jewels of its fleet, and were leased from AIG's Los Angeles-based International Lease Finance Co. in 2001.

Varig spokesman Paulo Cesar Fonseca declined Friday to provide details of the negotiations and did not know how long it could take for the plane to be released.

He insisted that none of the airline's other operations were affected, saying an MD-11 is now being used to cover the seized plane's regular route.

AIG spokesman Joe Norton referred comment to an International Lease Finance official who could not immediately be reached Friday to comment.

AIG has been in talks to acquire a 20 percent stake in Gol, one of Varig's Brazilian competitors, according to Brazilian media reports. Gol, a discount carrier modeled after Southwest Airlines in the United States, launched service in 2001 and is the fastest growing carrier in Brazil's struggling airline industry.

Varig is widely viewed in Brazil as the country's national carrier and is a source of deep pride for Brazilians, though the government does not own it.

But Varig is struggling under $760 million in debt, and was asked several weeks ago by Brazilian securities regulators to restate financial results for 2001 and the first half of 2002.

Government officials found about $371 million in accounting errors. Restatements could widen Varig's 2002 first-half loss to about $571 million from $286 million. Varig has also been the subject of takeover talk because of its financial difficulties.

[Wubble U]

Isn't it ironic that the American lessors had the aircraft seized for non-payment of the lease fees, yet had Varig been an American carrier they could just have claimed Chapter 11 protection and carried on regardless! Nothing like a level playing field!

[GlueBall]

Not exactly, because U.S. bankruptcy courts and laws have no jurisdiction outside USA.

[GlueBall]

For Brazil's Varig, Flying Becomes Game Of Cat And Mouse
Friday January 31, 5:26 pm ET
By Andrea Welsh, Of DOW JONES NEWSWIRES

SAO PAULO (Dow Jones)--Bad just got worse for Brazil's flagship airline Varig, or Viacao Aerea Rio Grandense SA .
Until now, the debt-ridden carrier has managed to keep its planes in the air despite a stack of past due bills and tense negotiations with creditors over $ 760 Million in debt.

That changed Thursday when aircraft lessor International Lease Finance Corp. snared a Boeing 777 on a Paris runway, saying Varig had failed to make lease payments on the jet.

The grounding of the Boeing 777, one of two leased to Varig by ILFC, is yet another sign that creditors could be closing in on Brazil's flagship carrier. Varig is expected to keep the twin Boeing out of international airspace, trying to fill seats on the jumbo jet by flying domestic routes.

"If negotiations were continuing you wouldn't seize a plane," said Bob Mann of airline consulting firm R.W. Mann & Co. in New York state. "This is the kind of thing that poisons a relationship."

The seizure of the Boeing jetliner at France's Charles de Gualle airport might be designed to jumpstart stalled repayment talks, in Mann's eyes. But it could just as easily reflect deepening concerns about Varig's cash flow situation, he adds.

It was only several weeks ago that Varig was forced to start shelling out cash for fuel on a pay-as-you-go basis after Petroleo Brasileiro SA said the carrier had failed to pay its bills on time.

Then, in early January, a whiff of scandal was stirred when Brazil's securities regulator asked Varig to restate earnings for the first half of 2002, pointing out about 1.3 billion reals ($1=BRL3.50) in accounting errors. Varig's first half losses are expected to double to about BRL2.0 billion when earnings are recast.

Weak earnings won't help Varig in its drawn out struggle to renegotiate its hefty debt load with creditors. Appeals for government aid have fallen on deaf ears, and labor troubles are threatening the continuity of operations.

Creditors, unions, and the government are demanding the non-profit Rubem Berta Foundation, which owns more than 80% of Varig's stock, give up control of the airline.

Creditors include Boeing Corp. , Unibanco SA and General Electric Co.'s aviation leasing unit.

-Andrea

[zekeigo]

Lets not forget to mention VARIGs stone age management, the principal reason for the company to reach its acctual finantial problem.
The Brazilian Japanese Yutaka Imagawa is the number one reponsible leading his incompetent team running the company in a old fashion style.
And it is not late to remember the truculence of the acctual chief pilot, Mr. Gilberto Santos and the director of Operations, Mr. Luiz Martins, who was arrested yesterday, on the episode that they just fired a group of pilots on a hunt and kill style.
Sad.

[jmc_757-200]

This aircraft has been returned to Varig from ILFC after they paid up!

Thanks

jmc_757-200