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Varig Threatens to Stop Flying If Brazilian Justice Keeps Blocking Money

VarigLog, the new owner of Brazilian Airline Varig, threatened today, August 1st, to simply close the doors and stop flying if the Labor Justice insists on blocking US$ 75 million that have been injected in the company to keep it going.

Waleska Teixeira da Costa, VarigLog’s lawyer told reports after an unsuccessful meeting with representatives of Varig’s employees that the Justice decision cannot be accepted by the new Varig: "If the money is really blocked, Varig will die."

On Friday, July 28, Varig announced the dismissal of 5,500 employees. Through the Civil Aviation Workers Union these employees petitioned for and were granted an injunction blocking US$ 75 million to guarantee part of the money they are owed.

Waleska argue that VarigLog is doing everything that is supposed to do, according to the contract it signed when it won the auction to acquire the bankrupt airline. She notes that the labor debt was offered no special treatment and was included with all other debts of the ailing company.

Judge Luiz Roberto Ayoub, who is in charge of Varig’s bankruptcy, should have the last word on keeping the money blocked or not. Ayoub has already requested an opinion from consulting firm Deloitte to advise if the injunction might prevent Varig from operating.

The Varig soap opera is being played beyond the courts though. Passengers overseas with Varig tickets are having increasing difficulty to get a flight in another airline. Since Friday, TAM, Brazil’s largest airline, has stopped validating Varig tickets in Paris, New York and Miami.

TAM has announced that they will not accommodate Varig passengers anymore even if they have empty seats in their airplanes. The reason, they say, is that Varig hasn’t paid over US$ 1.5 million they owed for previous endorsed tickets.

Apparently most foreign airlines are not accepting Varig passengers either. The bankrupt company was expelled in June from IATA, the International Air Transport Association, which acts as a clearing house among the international air carriers. Now the negotiations have to be made directly between Varig and the other airline.

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