Flight International Online news 10:GMT: Varig’s creditors are pressing for the carrier’s bankruptcy to be adjudicated under US law after a tumultuous week in the Brazilian courts saw a rescue bid first accepted and then rejected by a judge.
A senior Varig executive, speaking to Flight during the AITAL Latin American airline leaders forum in Miami says: “We are back to a situation where contradicting court decisions follow one after another in question of hours - it is exactly what the bankruptcy law was trying to avoid… International creditors are trying to get the jurisdiction of US bankruptcy laws recognised for their interests, because they feel unprotected by the Brazilian court system.”
The airline executive, however, notes that these creditors are not united, and each is seeking its own resolution. “We are observing a tremendous showdown over Varig’s future, with some of the most important creditors only wanting to get their aircraft back, while others want to in some way maintain their control and then others wanting to gain control.”
He adds: “All of this is then overshadowed by the January deadline where the airline could face liquidation if the strategic restructuring plan presented to the court does not receive everybody’s approval.”
These problems are hindering Varig’s reorganization plan, which has been developed by Lufthansa Consulting. This plan, says the executive, will “take Varig back to operational profitability immediately,” and provides for substantial growth over the next few years.
However, a major part of Varig’s restructuring plan has already stalled. The Varig executive admits that the reactivation of 16 aircraft currently grounded will not happen because Varig “doesn’t have the cash for the necessary maintenance” and that the aircraft might “not be flying again until the end of the bankruptcy process”.
Varig had planned to reinstate eight of the aircraft next week. “It will require several million US dollars to make them airborne again, and this is currently not realistic,” says the executive.
Creditors including labour pension funds, government agencies, and lessors were due to submit their plans for Varig by today (December 19).
RAINER UPHOFF / MIAMI
Source: Flight International
