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Aviation History
2002
2002 - 0016.PDF
BUSINESS FINANCIAL RESCUE JACKSON FLORES / RIO DE JANEIRO Boeing and Vang sign rescue deal Aircraft manufacturer comes to aid of stricken Brazilian flag carrier with $370 million buy and lease-back Boeing has signed an agreement providing Brazilian flag carrier Varig with urgently needed respite from its worsening financial situa tion. The $370 million deal will see Boeing buy and lease back four Boeing MD-lls and two Boeing 737-3O0s originally acquired under a lease-finance arrangement with US Wilmington Trust. The agree ment also allows Boeing to acquire a stake in Varig. The US airframer's vice-president for Latin American and Caribbean sales, Daniel Silva, says the com pany would not take up the offer immediately, claiming it was "merely a clause for future develop ments". Nonetheless, the agree ment sparked an immediate 43% rise in Varig shares, spurred on by rumours of another important announcement in January. Varig had previously written down the aircraft as part of its $1.2 billion debt, a figure it is now trying to reduce to below $400 million. At the same time, Boeing has delivered the first two of six 777-200ERs due to be delivered to Varig to begin a long-haul fleet renewal programme. Varig's holding company, the Ruben Berta Foundation Participates (FRB), has been strug gling to alleviate the group's current financial difficulties. Up to September, Varig amassed losses of $272.1 million this year and risked losing 24 aircraft to lessor GE Capital Aviation Services (GECAS) before it renegotiated its payments. Since September, Varig has responded by laying off 600 people and intends to further trim its staff down to 15,500 employees. FRB Despite its problems, Varig has taken delivery of its first 777-200ER has been seeking a partner for VarigLog, an independent cargo airline, but negotiations have cooled in the wake of the terrorist attacks in the USA. FRB is also look ing for a partner for Varig's mainte nance division, which is scheduled to start operations as a separate company in January under the name VEM. "We will form partnerships, sell assets, dispose of companies and capitalise others - anything that is acceptable within the true sense of making business," says Varig's exec utive vice president and FRB presi dent, Yutaka Imagawa. Included on the disposals list is FRB's jewel in the crown, the regional carrier Rio-Sul. Having successfully renegotiated Varig's and Rio-Sul's standing leasing arrangements with GECAS, FRB expects to save $162 million annually. RECAPITALISATION Government bolsters Air NZ Air New Zealand shareholders have approved a move by the New Zealand government to buy NZ$885 million ($370 million) worth of shares to save the airline from insolvency. The airline will repay a NZ$300 million government loan with new stock and sell the government a further NZ$585 million worth of shares. Major shareholders have agreed to support the deal but will not invest further in the troubled airline. Air NZ's board and the gov ernment believe the plan will address the immediate liquidity problems and undercapitalisation, and will provide a reasonable platform to restructure the business over the next five years. But a report by investment bank Grant Samuel & Associates says: "Never theless shareholders must recognise that...Air NZ will not be in a financial position to sustain any further material extended downturn in business or other adverse impact. In such circumstances the company will be dependent on the government's willingness to pro vide further loan or equity capital, or to underwrite a cash issue, or support a private placement possibly to another airline." PRIVATISATION El Al union debates Sharon plan Israeli prime minister Ariel Sharon has set up a committee to prepare for the privatisation of the national airline El Al. The El Al workers union is against the privatisation, but has promised to co-operate with the government if it returns $130 million taken from the workers compensation fund. The Israeli treasury has not responded yet to the demand. "Without the co-operation of the workers, the privatisation effort will fail," an airline source says. CLOSURE COSTS GRAHAM WARWICK / WASHINGTON DC Manufacturers remain ish despite losses Aerospace component manufactur ers B/E Aerospace and Goodrich have revealed how much recent job cuts and factory closures have cost them (Flight International, 30 October - 5 November 2001). But despite the deepening downturn, both issued predictions of better times to come. Aircraft interiors manufacturer B/E Aerospace announced that the consolidation programme had cost it around $100 million, bringing it heavily into the red in the third quarter of 2001, ending 24 November. Excluding the costs of cutting 1,000 jobs - 20% of its workforce - and closing five of its 11 plants, the company actually made a small profit of $500,000. It expects sales of $700 million for the full 2001-2 financial year, which ends in February, falling to $650 million in 2002-3. Profits for the full year have been obliterated by the slowdown and the company expects only to break even, before the $100 million cost of "consolidation" is taken into account. While next year should bring in earnings of $27 million ($15 million after consolidation costs), most will be made in the second half of the year, as the sav ings made through consolidation begin to come in. Meanwhile, undercarriage spe cialist Goodrich has also been hit hard by its restructuring pro gramme. The company's forecast earnings for 2001 have been slashed from $310 million to only $80 million by the $230 million cost of cutting 2,400 jobs - around 10% of the workforce - and closing 16 plants between now and March. The clo sure costs will continue into the first half of 2002. 14 1-7 JANUARY 2002 FLIGHT INTERNATIONAL www.flightinternational.com
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