Friday, July 21, 2006


Varig is sold

At last, Varig, which until not long ago was the biggest Brazilian air carrier, was sold.

Varig had been facing financial problems for more than a decade. The company was big in the 1980s, but they didn't adapt to the new times. The owners of the company were their own employees, and they were too reluctant to the adoption of modern management practices (e.g., personnel reduction, payments for performance).
In the 1990s, when fresher companies like TAM and GOL entered the market, Varig could not stand the war of prices.

Varig was sold to VarigLog, a subsidiary created by Varig in the 1990s to compete in the market of courier services; ironically, the offspring (managed more professionally) managed to outgrow the mother company.
The company was sold in a Judicial bidding process; there were very few bidders, and some of them were disqualified by the Justice.
In the end, Variglog paid US$20 million in cash, and issued another US$ 485 million in bonus. The new board of directors announced that, of the current 10,000 employees, less than 2,000 should remain. The number of aircrafts and the number of routes to be operated by the new company is still under discussion.

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