Last hope for Varig as beleaguered airline to endure another auction

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By Jackson Flores in Rio de Janeiro

Following the abortive attempt made by Varig's trade union consortium TGV to acquire the embattled carrier, its one-time cargo subsidiary - VarigLog - is now seen as the Brazilian flag carrier's last hope for survival.

The carrier is continuing to operate some services, although around half of its 56-strong aircraft fleet has been withdrawn and is in storage, with many of the aircraft parked at its base at Rio de Janeiro Galeao International airport.

© Gianfranco Beting 

Down and out? Half of the 56-strong Varig fleet has been parked

Although there is pressure for the carrier to be declared bankrupt, Rio de Janeiro's eighth business court last week opted to accept a VarigLog proposal tendered in June. After VarigLog's proposal gained approval from creditors, Judge Luiz Roberto Ayoub - who is supervising Varig's sale - set 19 July as the date for a new auction, which is expected to attract other interested parties.

After placing a $449 million winning bid in an auction last month, the TGV - which comprises the airline's five trade unions - was unable to make the mandatory $75 million deposit despite repeated deadline extensions. VarigLog then submitted an offer for the ailing airline in mid-June, signalling its intention to acquire a 90% stake for $485 million.

Since then VarigLog has injected nearly $11 million to pay airport fees and fuel bills that have allowed Varig to fly roughly 49% of its domestic services and approximately 45% of its international flights that amount to 26 destinations.