Rio De Janeiro, Brazil – A group of employees of Brazil’s flagship airline Varig scrambled to raise funds Thursday for a first installment toward purchasing the struggling carrier, whose survival could depend on their success.
The workers’ group, TGV, agreed to purchase the airline’s healthy assets for $449 million as the lone bidder at a bankruptcy auction on June 8.
TGV’s offer was far below the minimum bid set at $860 million, but Judge Luiz Roberto Ayoub said he would accept it if TGV made the first deposit of $75 million by Friday.
Failure to make the deposit could prompt Ayoub to order the liquidation of 79-year-old Viacao Aerea Rio-Grandense, or Varig.
As the deadline approached, the airline’s liquidation appeared imminent. Varig canceled more than 100 flights and TGV head Marcio Marsillac acknowledged 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 Wednesday. “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.
The Estado news agency, citing an unidentified source, reported Thursday that Volo do Brasil group, which purchased Varig’s cargo subsidiary VarigLog earlier this year, was prepared to offer $500 million for the carrier if TGV’s bid is rejected.
“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.
“But this has to be done in hours, not weeks or months,” he added.
Other possible investors, like OceanAir and Portugal’s TAP, which had expressed interest in the past, said they did not plan to make any offers for Varig.
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.
On Wednesday, Varig suspended service to dozens of international and domestic destinations and canceled more than 100 flights, stranding passengers as creditors tried to seize its planes.
Varig called the suspensions “temporary” but did not say in a statement how long they would last as the carrier negotiates with jet leasing companies and struggles to survive an increasingly bleak bankruptcy reorganization process.
Nearly 140 of Varig’s 298 flights within Brazil and to and from Europe and the United States were canceled, Brazil’s Agencia Estado news service reported.
Thousands of Brazilians are in Germany for the World Cup, leaving many of them and even the national soccer team without assured return tickets. Brazil’s government has said it will find ways to bring Brazilians home if they are stranded.
