New Auction for Brazil’s Varig Only Next Week If Airline Can Survive That Long

Around 200 foreign airlines are accepting tickets for flights on Varig, which also resumed its flights to New York. According to a note released by the Brazilian airline, the companies are continuing to embark passengers with Varig tickets, depending on seat availability.

Varig informs that the temporary suspension declared by the Clearing House, a compensation chamber operated by the International Air Transport Association (IATA), has not prevented affiliated airlines from accepting passengers with Varig tickets. The Clearing House is used by the airlines to balance their ticket purchase accounts.

The 18 members of another association, the Star Alliance, which includes such airlines as TAP, United Airlines, and Lufthansa, are also accepting the tickets, according to the note.

Moreover, only 11 of the more than 200 foreign companies affiliated with IATA have announced that they are not accepting passengers holding Varig tickets. The 11 include Delta (US), Alitalia (Italy), and JAL (Japan).

According to the Varig press office, the IATA suspension may be lifted as soon as the company repays its debt. Nevertheless, IATA still requires Varig to maintain a US$ 24 million security deposit in the compensation chamber to cover eventual payments.

A new auction to sell the bankruted company should not happen this week. Despite being on its death bed and even with an offer of immediate US$ 20 million in cash to pay the most pressing debts, the Brazilian justice is unable to accelerate the process that might save the name Varig before the company goes belly up.

Judge Paulo Roberto Fragoso from Rio de Janeiro announced this Monday, June 26, that he is waiting for the details of a purchase plan made by VarigLog, which would buy the company for  US$ 485,000 and would inject immediately US$ 20 million to meet emergency bills including those to leasing companies in the United States.

Fragoso discarded the possibility that the auction be held this week. "Every day without a definition is costly, very costly. We want for the auction to happen as fast as possible. This could happen in the coming week."

Luiz Roberto Ayoub, the judge responsible for Varig’s bankruptcy case, says that a meeting of creditors and a new auction are indispensable before any action can be taken. According to him, no representative of VarigLog has contacted him.

Brazil’s National Union of Air Companies (Snea – Sindicato Nacional das Empresas Aéreas) informed that they will file an injuction before Brazilian capital Brasí­lia’s Justice asking that the Anac’s (National Agency of Civil Aviation) decision authorizing the sale of VarigLog to Volo be declared void.

ANAC argues that Volo, the company that bought Varig’s subsididary VarigLog and now is offering to buy Varig itself is a foreign firm with 80% of its capital being from the American Fund Matlin Patterson. 

Brazil’s legislation requires that companies with more than 20% of foreign capital cannot acquire a Brazilian airline. The problem is that nobody else is showing any interest in buying the Varig name besides Volo.

ABr, Bzz

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