Brazilian Airline Varig to Lay off Nearly 60 Percent of Work Force

Brazil's embattled flagship airline Varig will lay off 5,500 employees - nearly 60 percent of its work force - as the carrier emerges from bankruptcy proceedings under new owners, the company said Friday.

Viacao Aerea Rio-Grandense SA, or Varig, which was recently sold to its former subsidiary, VarigLog, said in a statement that only 3,985 of its 9,485 employees would be keeping their jobs. The workers began receiving notification of the layoffs on Friday, Varig said.

Varig employees at Sao Paulo's international airport, Brazil's largest, went on strike after the layoffs were announced, disrupting flights and delaying passengers.

Only 100 of the company's 400 employees at the airport would not be fired, Globo TV reported. The employees said they would not return to work until the company gave them unpaid wages from the past three months.

Varig has said it will operate as a smaller airline at first, but hopes to rehire the employees once it resumes growth and increases profitability.

Part of a court-approved bid to save the airline, the layoffs were widely expected following last week's sale of Varig in a $500 million deal with VarigLog, controlled by the investor group Volo do Brasil.

Volo had tried to suspend most of the carrier's national and international routes last week amid heavy debts and difficult negotiations with plane leasing firms. The National Civil Aviation Authority nixed that move, however, ordering it to fly a restricted number of routes.

Varig has had trouble meeting basic operating payments and is currently flying only 10 planes from a former fleet of 65, operating service to seven domestic cities as well as New York; Miami; Buenos Aires, Argentina; and Frankfurt, Germany.

The carrier said it hopes to expand its routes after negotiating the use of more planes with leasing firms.

The company has been in financial trouble for years, with debts of some $3.6 billion. Under the restructuring plan, most of those debts, including labor obligations, will not be honored by the new owners.

Last month a group called TGV, formed by Varig's workers, agreed to purchase the airline for $449 million as the lone bidder at a bankruptcy auction. But the deal fell through after TGV failed to raise the cash to make an initial payment.

Long Brazil's leading airline, Varig has fallen behind TAM SA and Gol Linhas Aereas Inteligentes on the domestic market.

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