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Last Updated: Friday, 23 June 2006, 23:35 GMT 00:35 UK
Group misses Varig money deadline
Check-in area at Sao Paulo airport, Brazil
Most Varig flights have been suspended
A Brazilian bankruptcy judge has cancelled the sale of the country's heavily indebted national airline, Varig, to a consortium of employees.

The group failed to deliver its first payment of $75m (41m; 59m euros) by Friday's deadline.

The group, which had offered $449m for the ailing airline, said it had failed "to reach an agreement with investors".

The judge said prosecutors and the firm's bankruptcy administrators would now decide what to do.

Marcio Marsillac, head of the TGV workers group said: "We do not know what will happen. It is up to the judges to decide now."

Auction rules

Judge Roberto Ayoub had delayed the initial deadline for a further six hours.

But when the deposit was not made by the second deadline, Mr Ayoub annulled the sale.

Liquidating the firm, arranging another auction or setting meetings for creditors and the firm were all options, he said.

The sole offer made by the TGV, which also included foreign investors, at an auction on 8 June was well below the $860m minimum asking price.

One of the conditions stated at the auction was that the initial $75m had to be delivered by Friday.

Stranded

By 1700GMT on Friday, the airline had cancelled 142 - the majority - of its flights.

Services to 10 cities including New York, Paris, Los Angeles and Milan had all been suspended.

It is thought that 28,000 Varig customers are currently abroad between now and 30 June including many at the World Cup in Germany.

Before Friday, the airline promised to provide alternative arrangements for people affected by the cancellations.

Some travellers however said they could not get on other flights and had been stranded.

The airline has been under increasing pressure recently after missing payments to jet leasing firms, which provide 80% of its planes.




SEE ALSO
Brazilian airline cancels flights
21 Jun 06 |  Business
Brazil court backing Varig deal
20 Jun 06 |  Business
Varig fate unclear after auction
08 Jun 06 |  Business
Varig route disposal plan blocked
12 Apr 06 |  Business

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