Brazil's Passengers Stranded As Creditors Try to Seize Planes

Brazil's embattled flagship airline Varig suspended service indefinitely to dozens of destinations and canceled more than half of its flights, stranding passengers in Brazil and abroad as creditors tried to seize its planes.

Viacao Aerea Rio-Grandense SA, or Varig, in a statement Wednesday called the suspensions "temporary" but did not say how long they would last as the carrier negotiates with jet leasing companies and tries to emerge from an increasingly bleak bankruptcy reorganization process.

Varig canceled 180 of its 356 flights in Brazil, Latin America, Europe and the United States, Brazil's Agencia Estado news service reported. The company did not say how many passengers were affected.

The carrier's troubles deepened as thousands of Brazilians are in Germany for the World Cup, leaving many of them - even the national soccer team - without assured return tickets. Brazil's government has stressed that it will find ways to bring Brazilians home if they are stranded.

Defense Minister Waldir Pires didn't rule out the possibility of using Brazilian Air Force planes to handle the crush of returning Brazilians in coming weeks, but told reporters that would only happen in a worst case scenario. The best solution, he said, would be for Brazilian carriers that already fly overseas to somehow meet the demand.

Despite company claims that that tickets for the canceled flights would be honored by other airlines, at least 60 passengers were stuck Wednesday in New York's John F. Kennedy Airport, said Roberta Pacini, a Brazilian whose Tuesday morning Varig flight to Sao Paulo was canceled.

When Varig announced Wednesday that its New York-Sao Paulo service had been suspended, other carriers declined to honor the tickets or didn't have space on their flights for the Brazilians, some with small children, Pacini said in a telephone interview.

Varig's move Wednesday dropped routes to Milan, Italy; Munich, Germany; Madrid; Paris; New York; Los Angeles; Mexico City; Montevideo, Uruguay; Asuncion, Paraguay; and Bogota, Colombia. The company also suspended service to 15 of its 29 destinations in Brazil, Latin America's largest country, Globo TV reported.

The carrier said it would maintain flights to Frankfurt, Germany; London; Miami; Buenos Aires, Argentina; Lima, Peru; Santa Cruz de La Sierra, Bolivia; Santiago, Chile; and Caracas, Venezuela.

Late Wednesday, Brazil's Civil Aviation Authority said it had struck deals with Germany's Lufthansa AG to honor Varig tickets to and from Munich; with Italy's Alitalia SpA for service to Milan; and with Brazil's TAM Linhas Aereas SA for routes to London and Paris.

Varig's financial troubles left all but 25 of the company's 61 jets inactive, local media said. Some 20 planes are grounded to comply with U.S. court orders following lawsuits from leasing companies seeking the return of aircraft after Varig missed repeated lease payments. Another 16 other planes were reportedly grounded due to maintenance issues.

On Wednesday, Judge Robert Drain of the U.S. Bankruptcy Court in Manhattan extended an injunction preventing leasing companies from seizing the planes for one month to give the airlines' new owners time to restructure the company.

But Varig's new owners TGV, a consortium lead by airline workers trying to take over the airline, were struggling to raise cash to pay the first deposit of $75 million for the airline they purchased at a bankruptcy auction on June 8.

If TGV does not make the deposit by Friday, the auction will be declared void, a Brazilian bankruptcy court judge has said.

The company also was struggling to pay fuel bills and the government's airport administration said it would start demanding Varig pay airport fees in cash daily on Friday.

TGV claims to have the backing of several large investors but has declined to name them.

Varig has been in financial trouble for years, with debt of $3.5 billion. It 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.


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