Bad Decisions, Economic Woes Send Brazilian Airline into Tailspin

Bad business decisions, economic problems in Brazil as well as changes in the world air transportation market have all contributed to sending airline Varig, one of the largest in Latin America, into a tailspin.

A Brazilian court last Friday cancelled the sale of the bankrupt airline to an employees group for $449 million after it failed to make a deposit on time, and delayed a decision on the carrier´s fate until next week.

The sale to NV Participacoes, a consortium of Varig employees and unidentified investors, was invalid because of the failure to pay a $75 million deposit, the court of Rio de Janeiro announced in a statement.

The company is now left with more than $3 billion in debt, only 20 planes –down from 70 it had a year ago- some 10,600 unpaid employees and about 30,000 passengers stranded in airports around the world.

Varig, which dominated Brazil´s domestic aviation market in the 1970s and 1980s, fell victim of macroeconomic problems that have been dogging Brazil since the 1980s and 1990s.