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Varig | bankruptcy exit plan


VARIG – Viação Aérea Rio-Grandense S.A.

Led the commercial team & bankruptcy exit plan

The timing of VARIG’s bankruptcy coincided with new Brazilian restructuring laws.  Previously, Brazil forced bankrupt companies to liquidate; whereas companies were now allowed to reorganize (similar to Chapter 11).  This entailed the need for intense vetting & review of any proposed post-bankruptcy commercial strategy prior to consideration of new liquidity by investors and before submission to the bankruptcy court.

Project requirements:

  • Oversee the VARIG commercial team and asisst in finalizing details of the post-bankruptcy commercial strategy.
  • Responsible for final evaluation & review of the proposed post-bankruptcy commercial strategy documentation (prior to submission to the courts).
  • Identify specific operational initiatives and marketing components from the commercial strategy where further efficiences and/or greater revenues were likely achievable.  For those identified, direct & assist remaining airline management to re-work the commercial plan accordingly so as to realize improvements.

Major Project undertakings:

  • Network plan was completely revised using new leased aircraft (as many former VARIG planes had  been repossessed).
  • Schedule was revamped to protect slots and maintain bi-lateral agreements (despite pricing & trade-off analysis clearly indicating the changes would result in increased short-term losses).
  • So as to take advantage of newly leased aircraft, improvements to the inflight product were initiated (notably to inflight entertainment, the inflight magazine, and food & bar service levels) which clearly demonstrated VARIG’s determination to reclaim the market leadership position.
  • Further schedule adjustments were made to ensure connectivity to Star Alliance partners; especially to the codeshare flights identified which had large passenger cross-feeds.
  • Additional and more aggressive frequent flyer program (FFP) initiatives – for the VARIG ‘Smiles’ program – were developed in order to bring back customers.  Robust promotions were created to entice both VFR & business travellers, and for all tier levels of the Smiles program.

Project outcomes:

  • Soon after emerging with a solid and viable restructuring plan, VARIG convincingly demonstrated its ability to achieve & maintain projected revenue generation levels.  As a result, six (6) months after completing its restructuring, VARIG was indentified as a prime merger/buy-out candidate, and was subsequently purchased by the #1 Brazillian carrier GOL (Linhas aéreas inteligentes).
  • It was clear that investors were convinced by the commercial & operational improvements to VARIG, as evidenced by the jump in investment & funding opportunities made available to the airline in the period immediatly preceeding the GOL buy-out.


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