Brazil's Passengers Stranded As Creditors Try to Seize Plane

Varig's financial troubles left all but 25 of the company's 61 jets inactive, local media said. Some 20 planes are grounded to comply with U.S. court orders following lawsuits from leasing companies seeking the return of aircraft after Varig missed repeated lease payments. Another 16 other planes were reportedly grounded due to maintenance issues.

But Varig's new owners TGV, a consortium lead by airline workers trying to take over the airline, were struggling to raise cash to pay the first deposit of $75 million for the airline they purchased at a bankruptcy auction on June 8.

If TGV does not make the deposit by Friday, the auction will be declared void, a Brazilian bankruptcy court judge has said.

The company also was struggling to pay fuel bills and the government's airport administration said it would start demanding Varig pay airport fees in cash daily on Friday.

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RIO DE JANEIRO, Brazil (AP) -- The survival of Brazil's flagship airline Varig is on the line as a group of employees scramble to raise enough money for a first payment on the carrier, which faces liquidation if the money isn't paid or another suitor doesn't emerge by Friday.

The workers' group, TGV, faces a Friday deadline to make the $75 million payment, but acknowledged it may not be able to come up with the cash.

Meanwhile, Varig continued to strand passengers in Brazil and abroad on Thursday. By the afternoon it had canceled 118 of its 189 flights, Brazil's National Civil Aviation Authority said.

Other domestic and international airlines geared up to take over Varig's routes if the company is broken up, but there could be an incredible crush of people trying to get back to Brazil if the carriers can't meet the demand.

Thursday night, officials said there are 28,000 people abroad who have tickets to fly to Brazil on the airline between this week and June 30.

Thirteen thousand of them are in Europe, many of them Brazilians in Germany for the World Cup. Varig also transported Brazil's national soccer team to Germany and is scheduled to bring the defending World Cup champion team back.

But the authorities insisted that some airlines were abiding with government pleas to honor Varig tickets, making it possible for Brazilians who got stuck overseas to get home -- despite delays sometimes lasting days.

"I'm not minimizing the hassles for the passengers, but in the context of an emergency plan, I think it is a success," said Milton Zuanazzi, the aviation authority's general director.

Brazilian authorities have said Air Force planes could be used to bring back stranded Brazilians in a worst- case scenario, and the military said Thursday that two aging Boeing 707s are available if needed.

Varig's troubles deepened Wednesday, when the airline suspended dozens of routes in Brazil, Latin America, Europe and the United States and commenced cancellations amid efforts by leasing companies to seize planes and the carrier's inability to pay everything from jet fuel to airport departure fees.

TGV's $449 million offer for Varig is far below the minimum bid set at $860 million, but Brazilian Judge Luiz Roberto Ayoub said he would accept it if TGV makes its first deposit by Friday.

Failure to do so could prompt Ayoub to order the liquidation of 79-year-old Viacao Aerea Rio-Grandense SA, or Varig.

As the deadline approached, the airline's liquidation appeared imminent, with TGV head Marcio Marsillac acknowledging that his group might not manage to scrape together the initial payment.

"No one is 100 percent sure if this money will be available on Friday," Marsillac told reporters. "If it doesn't work out with the people we are negotiating with, we won't have the money to deposit."

Marsillac said TGV was negotiating with three unnamed groups to try to raise the money.

Analysts said the judge should consider other alternatives before deciding whether to let the company die -- but must act quickly before customers, who are already irate and waiting days in some cases to fly, lose complete faith in Varig.

"If the workers' consortium doesn't have the money to live up to their commitment, then let's bring in other investors," said Robert Booth, a Miami-based aviation consultant and editor of an aviation newsletter focusing on Latin America.

"This has to be done in hours, not weeks or months," he added.

Other possible investors, like Brazil's OceanAir and Portugal's TAP Portugal SA, which had expressed interest in the past, said they no longer plan to try to acquire Varig because the company's financial problems have become almost insurmountable.

Burdened with some $3.5 billion in debt, Varig has been under protection from its creditors since June 2005, when it became one of the first companies to use a new Brazilian bankruptcy law similar to U.S. Chapter 11 proceedings

game over

A Brazilian bankruptcy judge has cancelled the sale of the country's heavily indebted national airline, Varig, to a consortium of employees.

The group failed to deliver its first payment of $75m (£41m; 59m euros) by Friday's deadline.

The group, which had offered $449m for the ailing airline, said it had failed "to reach an agreement with investors".

The judge said prosecutors and the firm's bankruptcy administrators would now decide what to do.

Marcio Marsillac, head of the TGV workers group said: "We do not know what will happen. It is up to the judges to decide now."

Auction rules

Judge Roberto Ayoub had delayed the initial deadline for a further six hours.

But when the deposit was not made by the second deadline, Mr Ayoub annulled the sale.

Liquidating the firm, arranging another auction or setting meetings for creditors and the firm were all options, he said.

The sole offer made by the TGV, which also included foreign investors, at an auction on 8 June was well below the $860m minimum asking price.

One of the conditions stated at the auction was that the initial $75m had to be delivered by Friday.

Stranded

By 1700GMT on Friday, the airline had cancelled 142 - the majority - of its flights.

Services to 10 cities including New York, Paris, Los Angeles and Milan had all been suspended.

It is thought that 28,000 Varig customers are currently abroad between now and 30 June including many at the World Cup in Germany.

Before Friday, the airline promised to provide alternative arrangements for people affected by the cancellations.

Some travellers however said they could not get on other flights and had been stranded.

The airline has been under increasing pressure recently after missing payments to jet leasing firms, which provide 80% of its planes.

Like Tommy said..

This is very sad news.