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Aviation History
2004
2004-09 - 1557.PDF
AIR TRANSPORT FINANCE JACKSON FLORES / RIO DE JANEIRO Varig debt rings Brazilian alarms Government tells defence and treasury ministries, national bank and other agencies to formulate rescue plan this month The first of four ex-Iberia 757s has arrived for operation on Varig's South American network Varig's increasingly precarious financial position has spurred the Brazilian government to seek a viable solution to prevent the country's major airline folding. The airline has improved its financial performance significantly since signing a major codeshare deal with TAM, but there are fears that Varig's $2 billion global debt will lead to its closure early next year. Defence and treasury ministries, along with Brazil's state develop ment bank BNDES and other fed eral agencies, have been instructed by the government to present a res cue plan before the end of August. Removal of FRBPar as the Varig Group's governing body is already one of the key proposals, as is the START-UP Myanmarto form carrier Myanmar's government plans to establish another international carrier that will begin operations later this year using widebody aircraft to serve destinations in Asia and Australia. Air Myanmar is 51 %-owned by the Myanmar government, through the auspices national domestic carrier Myanma Airways. The remaining stake is held by three parties - Myanmar oil and gas company Dawn Light, Hong Kong-based Cathay Aviation and Singapore firm Fast Growth Associates. Cathay Aviation is unrelated to Cathay Pacific, although manag ing director Dave Rowe is a former Cathay Pacific pilot. The airline plans to start oper ations towards the end of this year with a Boeing 767-200 or an Airbus A300-600. Initially it wants to fly scheduled services linking Myanmar's capital Yangon to Sydney via Singapore, as well as as to oper ate from Yangon to Bangkok in Thailand, Shanghai in China, Seoul in South Korea and Fukuoka in Japan. ruling out of redundancies. Several options are being exam ined, although the one reportedly favoured by the Brazilian govern ment essentially calls for the out right transfer of Varig to its leading creditors under the supervision of India's Jet Airways has resumed talks on finalising its stalled order for 10 Embraer 175 regional jets, says the Brazilian aircraft manufacturer's chief executive, Mauricio Botelho. Jet was announced as launch cus tomer for the stretched, 86-seat ver sion of the Embraer 170 in 2002, but the deal was postponed by the airline's financial difficulties, he says, and a contract was not signed. "Jet Airways is talking again about coming back to the deal," says Botelho. "But we don't know when there will be a contract." The 175 is scheduled for certification in Middle East entrepreneurs are putting together a comprehensive business plan for a new carrier, known as Arabjet, which aims to operate all-business scheduled pre mium services on short-haul routes in the intra-Gulf region. Arabjet says it has initiated dis cussions with Boeing with a view to obtaining either corporate-con figured Boeing 737 or Boeing Business Jet (BBJ) aircraft and is also the BNDES. According to govern ment sources, several local investors have indicated their interest in acquiring control of Varig - if the Brazilian government is willing to pardon the existing $1.1 billion tax debt held against the airline. December, but still lacks a cus tomer. "We are confident we will soon have a launch customer," he says. Turkish airline Atlasjet signed a letter of intent for four 175s and two 170s in June, which could become the first order if confirmed. "Our real intent in developing the 175, at marginal cost, was to offer an alternative for customers, allowing them to exchange perfor mance for payload," says Botelho. "We consider it an alternative to the 170 that might better fit customer requirements where very sound per formance is not required." intending to study equivalent offerings from Airbus. The carrier aims to develop as a hybrid, says chief executive Mohammad El Shanti: "It is a new business model bringing the cost savings from low-cost carriers, but offering premium services found in business class." El Shanti says the airline has backing from "a number of private investors" and could be ready to Varig has taken the first of four ex-Iberia Boeing 757-200s it is leas ing this year for South American routes and is negotiating for two ex- United Airlines Boeing 777-200ERs to replace two MD-lls being con verted to freighters for VarigLog. Republic Airways Holdings is among Embraer 170 customers with the ability to switch its options to the 175. The US carrier has just firmed up another four 170 options, taking its orders to 22 - all for United Express operations. These conversions were among 22 orders booked in the second quarter, which saw the Brazilian manufacturer achieve record sales of $924 million - 62% up on the same period last year. Commercial aircraft deliveries rose slightly, but included the first Embraer 170s helping net income increase to $80.2 million. operate its first flights late next year. Various possible bases are being studied, says the carrier, with Dubai, Doha or locations in Saudi Arabia under consideration - but it is yet to disclose precise routes for its proposed services. The carrier would outsource much of its opera tion, including maintenance and information technology, and use cost-saving initiatives such as inter net-based booking. ORDER GRAHAM WARWICK / WASHINGTON DC Jet Airways restarts Embraer talks STRATEGY DAVID KAMINSKI-MORROW / LONDON Arab all-business airline plan under discussion 14 24-30 AUGUST 2004 FLIGHT INTERNATIONAL www.fliqhtinternational.com
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