In a swift and surprising move, the new owners of Varig Brazilian Airlines, just a few hours after an auction to buy the forlorn company, suspended all flights, with exception of the Rio-São Paulo shuttle service, which is the most profitable piece of the business.
The flights are suspended at least for one week. What about the passengers holding Varig tickets? The new owners say there is no reason to worry about and that everyone will be placed in other airline companies, according to a contingency plan previously approved by ANAC (Agência Nacional de Aviação Civil), the Brazilian civilian aviation authority.
Things don’t seem to be running that smoothly though. And if a contingency plan is in place it doesn’t seem to be publicized enough. Brazzil Magazine has received complaints of people stranded in airports. In one such case a man from London wrote in an email:
"A friend of mine is at the São Paulo airport on her way back to England with a baby. She has been told that her flight by Varig was cancelled and she has not enough money to buy another ticket after attending her father’s funeral."
Varig was spared bankruptcy, yesterday, July 20, at the eleventh hour when it was bought by its former subsidiary VarigLog for the minimum price of US$ 24 million.
VarigLog has promised to assume several debts and commitments left by the old Varig, including US$ 112 million in previously bought tickets and US$ 32 million from the frequent-flyer program Smiles. It should also invest US$ 150 million in 30 days.
The new management announced that starting today, July 21, flight between Congonhas (São Paulo) and Rio (Santos Dumont) will be more than tripled going from 10 to 36.
In what is being called "first step in the strategy to recover the company" all the other flights have been cancelled. They will restart, management promises, gradually, beginning with Brazilian capital Brasília and then Porto Alegre, in Brazil’s southernmost state of Rio Grande do Sul.
That means also that all Varig’s foreign destinations have been scrapped, including New York, Miami, Copenhagen, London, Frankfurt and several Latin American cities.
Today, the new company will be at a New York hearing asking from the bankruptcy court more time to pay late lease fees. They will also try to prevent some airplanes from being seized while negotiating new contracts to allow other planes to go back into service.
The suspension of flights is scheduled to end July 28. But then number of flights should increase only gradually,
The market didn’t seem to like the sale to VarigLog. Varig stocks fell 31.39% to 2.60 reais, yesterday.