Brazil: Why Varig Airline’s Rescue Has Become an Impossible Proposition

Today judge Luiz Roberto Ayoub, of a Rio business court (8ª Vara Empresarial do Rio), will send a copy of the proposal by VarigLog to buy Varig to government legal officials (Ministério Público) and the Deloitte consultancy firm, which is the administrator appointed by the court.

Buying a troubled airline loaded down with problems and debt is never easy. To ease the sale, Varig was divided into two parts: a debtridden Varig Comercial, where the company’s liabilities have been placed (it is reported that Varig has debts totaling as much as US$ 3.5 billion).

More than 30% of the debt is owed to the Brazilian government (back taxes and social security contributions, mostly). This is an important point because last week government legal officials obtained a court injunction enabling them to move to the head of the line of creditors.

The other part of the old flagship airline is now known as Varig Operacional, and it is an attractive proposition as it has no liabilities, only Varig’s domestic and international routes.

Meanwhile, also last week, the union representing Varig employees went to court to question whether or not VarigLog is a legally eligible buyer under Brazilian legislation. Behind this maneuver is concern with another part of Varig debt: worker rights and benefits, not to mention salaries which are in arrears.

Also under analysis is the Varig frequent-flyer program, known as "Smiles." The question is if and how it will be honored by any buyer.

ABr

Tags:

You May Also Like

At the Mercy of the CIA

"I committed the only sin that politics does not forgive: to tell the truth ...

Discovering what Lies in the Swamps of Northeastern Brazil on a Sweltering Carnaval Night

So there I sat. Garbage, beer cans, and confetti littered the streets of Recife ...

Brazil Taxes as the UK and Delivers as a Banana Republic

During a recent speech at the CDES – the Brazilian Social and Economic Development ...

Brazilian Industry Slows Pace

Industrial production in Brazil fell 1.2% in February, compared with January. The decline affected ...

Alexandria’s Pope Visits Brazil to Consecrate First Coptic Church

Pope Shenouda III of Alexandria will make his first visit to Brazil in February. ...

Brazil Slaps Quotas on Chinese Textiles

The secretary of Foreign Trade at Brazil’s Ministry of Development, Ivan Ramalho, and the ...

Brazil’s Wookworkers Get a Coat of Technology

The main entities in Brazil’s furniture sector want to increase the technology access of ...

Painting favela in Brazil

If the End of Apartation is Impossible Then Brazil Is Impossible

At this beginning of the century, no ideological map exists, only ruins of "isms." ...

Brazil Tells the US and EU: ‘World Won’t Wait Another 20 Years’

As trade talks continue in Hong Kong, delegates from the G-20 group of developing ...

Striking Teachers Confront Brazil’s National Soccer Team With Chants of There Will Be no Cup

Brazil’s national soccer team was forced to avoid a group of 200 striking teachers ...