GOL CEO Sees Varig Profitable by Third Quarter of 2008

Brazilian airlines group GOL expects its Varig unit to be profitable starting in the third quarter of next year, Chief Executive Constantino de Oliveira Jr. said last week.

“We are expecting to break even in the third quarter of next year,” de Oliveira told reporters in London, where Varig this week resumed services.

Brazil’s second-largest airlines group behind TAM, the company operates budget carrier GOL and bought rival carrier Nova Varig in April. It paid $282.5 million for what remained of Varig less than a year after the airline was bought at auction by US investment fund Matlin Patterson for $24 million.

De Oliveira said the company was confident it could expand the business, stressing that the airline still holds brand value in Brazil. It plans to start service to Mexico City in November, Madrid in December and Miami and New York in 2008, he said.

Varig is in discussions with carriers about signing interline agreements to add extra range to its network though it is too early to talk about Varig joining an international airlines alliance, he said.

Once Latin America’s biggest airline, Varig was reduced to a shadow of its former self in recent years due to mounting debts and high leasing costs.

At one point it had over $3 billion debt but in 2005 started a painful bankruptcy recovery process, with the debt assumed by a separate company, the so-called old Varig.