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Last hope for Varig as beleaguered airline to endure another auction

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The carrier is continuing to operate some services, although around half of its 56-strong aircraft fleet has been withdrawn and is in storage, with many of the aircraft parked at its base at Rio de Janeiro Galeao International airport.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

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