Brazil's Gol nets ailing Varig successor

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Brazilian low-fare airline Gol has completed the long-awaited acquisition of VRG Linhas Aéreas, successor to Brazil's bankrupt flag carrier Varig, in a $320 million deal, writes Jackson Flores.

The transaction via its GTI subsidiary requires an initial $98 million cash payment, with the balance being settled through the allocation of non-voting shares to VarigLog and Volo, which acquired Varig last June for $24 million.

VRG had struggled to find a strategic partner after it launched operations last December with aircraft, personnel and a route network inherited from Varig.

A lack of market credibility and suspension of domestic and international routes led to monthly losses as high as $20 million before Chile's LAN Airlines offered a $17.1 million loan in January - a move viewed as an attempt, ultimately unsuccessful - by LAN to acquire a 20% stake.

Gol chief executive Constantino de Oliveira says VRG will operate independently under the name Varig and says it will require extensive restructuring if it is to wrest market share from rival TAM before the end of this year.

Oliveira adds that short- to mid-term plans include almost doubling VRG's 17-aircraft fleet to 20 Boeing 737s and 14 Boeing 767s, although local sources indicate that Gol is negotiating the lease of four to six Boeing 777-300ERs in order to resume those international services surrendered by Varig over the past two years.

Oliveira says that while the focus is on international route development, the airline will also operate key domestic services such as the Rio de Janeiro-São Paulo shuttle service, exploiting Varig's 124 slots at São Paulo's Congonhas airport.