Brazilian Government Sees Bankrupcy-Bound Varig Airline at Brink of Precipice

Once powerful and monopolistic Varig Airlines’s debt to the Brazilian Airport Infrastructure Company (Infraero) grows by US$ 424.600 (R$ 900 thousand) every day.

This information was provided today (25) by Infraero’s president, lieutenant general José Carlos Pereira. The debt refers to the use of airport facilities for landings and takeoffs and is supposed to be charged on a daily basis.

Altogether, the airline owes Infraero US$ 242.98 million (515 million reais). Of this total, US$ 62.75 million (133 million reais) represent outstanding debts, while the rest is sheltered by the company’s process of legal recovery.

The president of Infraero, who participated in a joint public hearing conducted by four Senate commissions, affirmed that a decision in favor of complying with the law and charging Varig the daily fees may be published in the Federal Registry in the next few days.

The legal basis is a ruling by the Federal Accounting Court (TCU). "The TCU and the Ministry of Defense have expressed an enormous concern, but it winds up running afoul of what the law permits," Pereira declared. For Pereira the Varig’s "situation is getting to the brink of the precipice."

According to Pereira, there is an interest in keeping Varig in the air. "If Varig goes broke, we won’t receive anything, and there will be one fewer airline. It is in the public interest to keep Varig in the air." He said that "the government has definitely made an effort," but he emphasized that "contributing public funds is something else."

For the general director of the National Civil Aviation Agency (ANAC), Milton Zuanazzi, Varig’s problems should be solved on the basis of the legal recovery process the company is currently engaged in.

In his view, what is most relevant at the present moment is for the company to have a cash flow, instead of a reckoning of what the company owes the federal government versus what it is owed by the federal government.

The latter approach is espoused by the Workers of the Varig Group (TGV). Varig’s total debt currently amounts to US$ 3.30 billion (R$ 7 billion), while the federal government owes it US$ 2.12 billion (R$ 4.5 billion).

When asked whether a contingency plans exists in the event that Varig ceases to operate, Zuanazzi replied:

"A regulatory agency that lacks a contingency plan is an irresponsible agency, and a regulatory agency that discusses a contingency plan while Varig continues to operate is equally irresponsible."

Agência Brasil

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