The survival of Brazil’s flagship airline Varig is on the line as a group of employees scramble to raise money for a first payment on the carrier, which faces liquidation if the money isn’t paid or another suitor doesn’t emerge.
The workers’ group, TGV, faces a Friday deadline to make the $75-million payment, but has acknowledged it may not be able to come up with the cash.
Brazil’s government announced it would make five air-force planes available to bring back stranded Varig passengers if needed.
Varig continued to strand passengers in Brazil and abroad on Thursday. By 10pm local time on Friday, Varig had already cancelled 57 flights, Brazil’s National Civil Aviation Authority said.
Other domestic and international airlines have geared up to take over Varig’s routes if the company is broken up, but there could be an incredible crush of people trying to get back to Brazil if the carriers can’t meet the demand.
On Thursday night, officials announced that there are 28 000 people abroad who have tickets to fly to Brazil on the airline between this week and June 30. Thirteen thousand of them are in Europe, many of them Brazilians in Germany for the World Cup.
But the authorities insisted that some airlines are abiding with government pleas to honour Varig tickets, making it possible for Brazilians who get stuck overseas to get home — despite delays sometimes lasting days.
”I’m not minimising the hassles for the passengers, but in the context of an emergency plan, I think it is a success,” said Milton Zuanazzi, the aviation authority’s general director.
Varig’s troubles deepened on Wednesday, when the airline suspended dozens of routes in Brazil, Latin America, Europe and the United States and began mass cancellations amid attempts by leasing companies to seize planes and the carrier’s inability to pay everything from jet fuel to airport departure fees.
TGV’s $449-million offer for Varig is far below the minimum bid set at $860-million, but Brazilian Judge Luiz Roberto Ayoub said he would accept it if TGV made its first deposit by Friday.
Failure to do so could prompt Ayoub to order the liquidation of 79-year-old Viacao Aerea Rio-Grandense SA, or Varig.
As the deadline approaches, the airline’s liquidation appears imminent, with TGV head Marcio Marsillac acknowledging that his group might not manage to scrape together the initial payment.
”No one is 100% sure if this money will be available on Friday,” Marsillac told reporters. ”If it doesn’t work out with the people we are negotiating with, we won’t have the money to deposit.”
Marsillac said TGV is negotiating with three unnamed groups to try to raise the money.
Brazil’s Agencia Estado news wire service, citing an unidentified source, reported on Thursday that Volo do Brasil would offer $500-million for the airline if TGV’s bid was rejected. Volo earlier this year purchased Varig’s cargo subsidiary unit, VarigLog.
Analysts said the judge should consider alternatives before deciding whether to let the company die — but must act quickly before customers lose complete faith in Varig.
”If the workers’ consortium doesn’t have the money to live up to their commitment, then let’s bring in other investors,” said Robert Booth, a Miami-based aviation consultant and editor of an aviation newsletter focusing on Latin America.
”This has to be done in hours, not weeks or months,” he added.
Other possible investors, such as Brazil’s OceanAir and Portugal’s TAP Portugal SA, which had expressed interest in the past, said they no longer plan to try to acquire Varig because the company’s financial problems have become almost insurmountable.
Burdened with about $3,5-billion in debt, Varig has been under protection from its creditors since June last year, when it became one of the first companies to use a new Brazilian bankruptcy law similar to United States Chapter 11 proceedings. — Sapa-AP