Varig's tough restructuring measures now appear to be bearing fruit, with the Brazilian carrier reporting an underlying profit for 1996 and looking for expansion this year backed by a fleet refurbishment and a new codeshare agreement with United Airlines.
The Varig figures are complicated by the issue of Brazil's inflation and fluctuating currency, but excluding these items, the carrier showed an operating profit of Real 91.7 million ($87 million) against a R7.5 million loss in 1995. Sales were down at Real 3.1 billion.
The airline says that the improvement largely stems from the long-running restructuring programme which wiped Real 140 million off costs. Over the last three years the group has cut its fleet back to 78 aircraft, renegotiated leases and trimmed back staffing and loss- making routes. The carrier, which has debts of around $2.2 billion, plans sale and lease-back deals on ten further aircraft this year, as well as a $60 million bond issue.
The company, which in October began a two-year $40 million fleet refurbishment, including a new livery, has also signed a codeshare deal with United. The agreement, due to come into operation in October, is expected to help Varig show an 8-10% boost in sales. Varig now has one-third of a US-Brazil passenger market worth around $42.5 billion a year, while United has 28%.
- Brazil's largest regional operator, TAM, has shown an underlying 1996 net profit of nearly Real58 million on sales of Real518 million, against profits of Real43 million in 1995. Passenger numbers were up by 19% to top 3 million.
Source: Flight International
