Varig

» see varig.com.br as it lived, on the wayback machine

~ the obituary ~

Viação Aérea Rio-Grandense was registered in Porto Alegre on 7 May 1927 by Otto Ernst Meyer-Labastille, a German aviator who had flown in the First World War and settled in southern Brazil. It was the first airline founded in the country and it began with a single Dornier Wal flying boat working the lagoon routes of Rio Grande do Sul, which were the only practical way to move between towns in a region with almost no roads.

What turned it into a flag carrier was somebody else's collapse. Panair do Brasil had the international network until the military government withdrew its license in February 1965, and the routes were handed to Varig essentially overnight. From then until 1990 Varig was Brazil abroad. It flew the Atlantic and the Pacific with the largest 747 fleet in Latin America, and the Rio to New York service had a reputation for cabin service that people still bring up. Domestically it held first place for most of that period without ever having to compete very hard for it.

The protection ended in 1990 when the Collor government opened the market, and Varig turned out to be a company built for a monopoly. The cost base was enormous and the ownership structure made raising capital nearly impossible against an aging fleet. TAM passed it domestically in 2001, the same year Gol started selling tickets at prices Varig could not approach, and the September 2001 traffic collapse took the international side down at the same moment. By 2005 the airline was in arrears to its fuel supplier and to the lessors who owned most of what it flew.

Varig applied for judicial recovery on 17 June 2005 and the court granted it on 22 June, under a Brazilian insolvency law that had come into force four months earlier and had never been tested on anything this size. It held together for another year on shrinking schedules and repossessed aircraft. On 20 July 2006 the judge accepted that the company could not be sold whole and split it in two, putting the productive half up for auction.

~ the case file ~

~ the foundation that owned it ~

Varig had an ownership structure no other major airline has tried. Ruben Berta, who ran the company from 1941 until his death in 1966, put the controlling shares into a foundation held for the benefit of the employees. From 1945 onward the staff collectively owned the airline they worked for, and the foundation appointed the board.

For forty years this was cited as a model, and it produced a workforce with genuine loyalty and a service culture that showed up in the cabin. After deregulation it became the trap. A foundation cannot issue equity to an outside investor without giving up the thing that defines it, so when Varig needed capital in the 1990s the only available instruments were debt and asset sales. The structure that made it admirable is the reason it had no way out.

~ the compass rose ~

The star on the tail was in use from 1961 and it is the version of this airline that people picture, painted on 707s and then on the 747s that went to Tokyo the long way around, through Los Angeles. Varig kept a Sunday routine on the Brazil to Europe flights involving a properly laid table and food that was not airline food, and enough people have written about it that it is clearly not nostalgia inflating a memory.

None of that was ever within reach of me. Brazil is not somewhere I have flown, and by the time I was buying international tickets at all, Varig was already a company in court. What survives at this distance is the archive, the scanned timetables and the photographs of a blue star on a tail at an airport that no longer handles that aircraft type.

~ what gol kept ~

The 20 July 2006 auction sold the operating half to Volo do Brasil, a group behind the cargo arm VarigLog, for about $24 million. That entity became VRG Linhas Aéreas and carried the brand along with most of the route network. What was left behind was renamed Flex Linhas Aéreas and inherited the debts, which is the structure every large insolvency reaches for when the alternative is that nobody bids at all.

Gol agreed to buy VRG on 28 March 2007 for around $320 million and closed it in April. For a while the group ran two brands from one certificate, though the flights were sold under Gol numbers, and the Varig IATA code and callsign were formally retired on 19 October 2008. When Flex went bankrupt in 2010 the last reason to keep the name separate disappeared. Gol still holds the trademark and has used it on a retro livery. An airline that a country flew for seventy nine years now exists as a paint scheme on somebody else's aircraft.

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