

Currently released so far... 12404 / 251,287
Browse latest releases
2010/12/01
2010/12/02
2010/12/03
2010/12/04
2010/12/05
2010/12/06
2010/12/07
2010/12/08
2010/12/09
2010/12/10
2010/12/11
2010/12/12
2010/12/13
2010/12/14
2010/12/15
2010/12/16
2010/12/17
2010/12/18
2010/12/19
2010/12/20
2010/12/21
2010/12/22
2010/12/23
2010/12/24
2010/12/25
2010/12/26
2010/12/27
2010/12/28
2010/12/29
2010/12/30
2011/01/01
2011/01/02
2011/01/04
2011/01/05
2011/01/07
2011/01/09
2011/01/10
2011/01/11
2011/01/12
2011/01/13
2011/01/14
2011/01/15
2011/01/16
2011/01/17
2011/01/18
2011/01/19
2011/01/20
2011/01/21
2011/01/22
2011/01/23
2011/01/24
2011/01/25
2011/01/26
2011/01/27
2011/01/28
2011/01/29
2011/01/30
2011/01/31
2011/02/01
2011/02/02
2011/02/03
2011/02/04
2011/02/05
2011/02/06
2011/02/07
2011/02/08
2011/02/09
2011/02/10
2011/02/11
2011/02/12
2011/02/13
2011/02/14
2011/02/15
2011/02/16
2011/02/17
2011/02/18
2011/02/19
2011/02/20
2011/02/21
2011/02/22
2011/02/23
2011/02/24
2011/02/25
2011/02/26
2011/02/27
2011/02/28
2011/03/01
2011/03/02
2011/03/03
2011/03/04
2011/03/05
2011/03/06
2011/03/07
2011/03/08
2011/03/09
2011/03/10
2011/03/11
2011/03/13
2011/03/14
2011/03/15
2011/03/16
2011/03/17
2011/03/18
2011/03/19
2011/03/20
2011/03/21
2011/03/22
2011/03/23
2011/03/24
2011/03/25
2011/03/26
2011/03/27
2011/03/28
2011/03/29
2011/03/30
2011/03/31
2011/04/01
2011/04/02
2011/04/03
2011/04/04
2011/04/05
2011/04/06
2011/04/07
2011/04/08
2011/04/09
2011/04/10
2011/04/11
2011/04/12
2011/04/13
2011/04/14
2011/04/15
2011/04/16
2011/04/17
2011/04/18
2011/04/19
2011/04/20
2011/04/21
2011/04/22
2011/04/23
2011/04/24
2011/04/25
2011/04/26
2011/04/27
2011/04/28
2011/04/29
2011/04/30
Browse by creation date
Browse by origin
Embassy Athens
Embassy Asuncion
Embassy Astana
Embassy Asmara
Embassy Ashgabat
Embassy Apia
Embassy Ankara
Embassy Amman
Embassy Algiers
Embassy Addis Ababa
Embassy Accra
Embassy Abuja
Embassy Abu Dhabi
Embassy Abidjan
Consulate Auckland
Consulate Amsterdam
Consulate Adana
American Institute Taiwan, Taipei
Embassy Bujumbura
Embassy Buenos Aires
Embassy Budapest
Embassy Bucharest
Embassy Brussels
Embassy Bridgetown
Embassy Bratislava
Embassy Brasilia
Embassy Bogota
Embassy Bishkek
Embassy Bern
Embassy Berlin
Embassy Belmopan
Embassy Belgrade
Embassy Beirut
Embassy Beijing
Embassy Banjul
Embassy Bangkok
Embassy Bandar Seri Begawan
Embassy Bamako
Embassy Baku
Embassy Baghdad
Consulate Barcelona
Embassy Copenhagen
Embassy Conakry
Embassy Colombo
Embassy Chisinau
Embassy Caracas
Embassy Canberra
Embassy Cairo
Consulate Curacao
Consulate Ciudad Juarez
Consulate Chennai
Consulate Casablanca
Consulate Cape Town
Consulate Calgary
Embassy Dushanbe
Embassy Dublin
Embassy Doha
Embassy Djibouti
Embassy Dili
Embassy Dhaka
Embassy Dar Es Salaam
Embassy Damascus
Embassy Dakar
Consulate Dubai
Embassy Helsinki
Embassy Harare
Embassy Hanoi
Consulate Ho Chi Minh City
Consulate Hermosillo
Consulate Hamilton
Consulate Hamburg
Consulate Halifax
Embassy Kyiv
Embassy Kuwait
Embassy Kuala Lumpur
Embassy Kinshasa
Embassy Kingston
Embassy Kigali
Embassy Khartoum
Embassy Kathmandu
Embassy Kampala
Embassy Kabul
Consulate Kolkata
Embassy Luxembourg
Embassy Luanda
Embassy London
Embassy Ljubljana
Embassy Lisbon
Embassy Lima
Embassy Lilongwe
Embassy La Paz
Consulate Lahore
Consulate Lagos
Mission USOSCE
Mission USNATO
Mission UNESCO
Embassy Muscat
Embassy Moscow
Embassy Montevideo
Embassy Monrovia
Embassy Minsk
Embassy Mexico
Embassy Mbabane
Embassy Maputo
Embassy Manila
Embassy Manama
Embassy Managua
Embassy Malabo
Embassy Madrid
Consulate Munich
Consulate Mumbai
Consulate Montreal
Consulate Monterrey
Consulate Milan
Consulate Melbourne
Embassy Nicosia
Embassy New Delhi
Embassy Ndjamena
Embassy Nassau
Embassy Nairobi
Consulate Naples
Consulate Naha
Embassy Pristina
Embassy Pretoria
Embassy Prague
Embassy Port Of Spain
Embassy Port Louis
Embassy Port Au Prince
Embassy Phnom Penh
Embassy Paris
Embassy Paramaribo
Embassy Panama
Consulate Peshawar
REO Basrah
Embassy Rome
Embassy Riyadh
Embassy Riga
Embassy Reykjavik
Embassy Rangoon
Embassy Rabat
Consulate Rio De Janeiro
Consulate Recife
Secretary of State
Embassy Suva
Embassy Stockholm
Embassy Sofia
Embassy Skopje
Embassy Singapore
Embassy Seoul
Embassy Sarajevo
Embassy Santo Domingo
Embassy Santiago
Embassy Sanaa
Embassy San Salvador
Embassy San Jose
Consulate Strasbourg
Consulate St Petersburg
Consulate Shenyang
Consulate Shanghai
Consulate Sao Paulo
Embassy Tunis
Embassy Tripoli
Embassy Tokyo
Embassy The Hague
Embassy Tel Aviv
Embassy Tehran
Embassy Tegucigalpa
Embassy Tbilisi
Embassy Tashkent
Embassy Tallinn
Consulate Toronto
Consulate Tijuana
USUN New York
USEU Brussels
US Office Almaty
US Mission Geneva
US Interests Section Havana
US Delegation, Secretary
UNVIE
Embassy Ulaanbaatar
Embassy Vilnius
Embassy Vienna
Embassy Vatican
Embassy Valletta
Consulate Vladivostok
Consulate Vancouver
Browse by tag
ASEC
AE
AF
AM
AR
AJ
AU
AORC
AG
AEMR
AMGT
APER
AGMT
AL
AFIN
AO
AMED
ADCO
AS
ABUD
ABLD
ASUP
ASECKFRDCVISKIRFPHUMSMIGEG
APECO
AID
AND
AMBASSADOR
AN
ARM
AY
AODE
AMG
ASCH
AMCHAMS
ARF
APCS
APEC
ASEAN
AGAO
ANET
ADPM
ACOA
ACABQ
AORL
AFFAIRS
ATRN
ACS
AFSI
AFSN
ADANA
ASIG
AA
AX
AUC
AC
AECL
AADP
AGRICULTURE
AMEX
ACAO
ACBAQ
AQ
AORG
ADM
AINF
AIT
ASEX
AGR
AROC
ATFN
AFGHANISTAN
AFU
AER
ALOW
AZ
AVERY
BA
BY
BU
BR
BE
BL
BO
BK
BM
BILAT
BH
BEXP
BF
BTIO
BC
BBSR
BMGT
BTIU
BG
BWC
BB
BD
BX
BP
BRUSSELS
BN
BIDEN
BT
CW
CH
CF
CD
CV
CVIS
CM
CE
CA
CJAN
CLINTON
CIA
CU
CASC
CI
CO
CACM
CDB
CN
CMGT
CS
CG
CBW
CIS
CR
CONDOLEEZZA
CPAS
CAN
CWC
CY
COUNTER
CDG
CL
CT
CIC
CIDA
CSW
CHR
CB
CODEL
COUNTERTERRORISM
CTR
COM
CICTE
CFED
CJUS
CKGR
CBSA
CEUDA
CARSON
CONS
CITEL
CLMT
CROS
CITT
CAC
CVR
CDC
CAPC
COPUOS
CBC
CBE
CARICOM
COE
COUNTRY
CLEARANCE
CACS
CTM
CNARC
ECON
EFIN
ETRD
EUN
EFIS
EG
ETTC
EZ
EPET
EAID
EAGR
ENRG
ECUN
EU
ELAB
ECPS
EAIR
EINV
ELTN
EWWT
EIND
EMIN
EI
ECIN
ENVR
ELECTIONS
EINVEFIN
EN
ES
ER
EC
EUC
EINT
EINVETC
ENGR
ET
EK
ENIV
ETRDEINVECINPGOVCS
ECONOMY
EAP
EFTA
EUR
EUMEM
EXIM
ERD
ENERG
EUREM
ESA
ERNG
EXTERNAL
EPA
EINVECONSENVCSJA
ECONOMICS
ELN
EINN
EFINECONCS
ENNP
EEPET
ETRDEINVTINTCS
ENVI
ETRO
ESENV
ECINECONCS
ECONOMIC
EAIDS
EDU
ETRA
ETRN
EFIM
EIAR
ETRC
EAIG
EXBS
EURN
ECIP
EREL
ECA
ENGY
ECONCS
ECONEFIN
ETC
ETRDECONWTOCS
EUNCH
EINDETRD
IR
IZ
IS
IAEA
INRB
IRAJ
IQ
IN
IT
IMO
INTERPOL
ICAO
IO
IC
ITALY
ITALIAN
IRAQI
ICTY
ID
IPR
IWC
ILC
INTELSAT
IL
IBRD
IMF
IA
IRC
ICRC
ILO
ITU
ITRA
IV
IDA
IAHRC
ICJ
ISRAELI
IRS
INMARSAT
ISRAEL
ISLAMISTS
INDO
IZPREL
ITPHUM
ITPGOV
ITF
IBET
IEFIN
INR
IACI
INTERNAL
IDP
IGAD
IEA
ICTR
IIP
INRA
INRO
IF
KJUS
KSCA
KNNP
KU
KCOR
KCRM
KDEM
KTFN
KHLS
KPAL
KWBG
KACT
KGHG
KPAO
KTIA
KIRF
KWMN
KS
KG
KZ
KN
KMDR
KISL
KSPR
KHIV
KPRP
KAWK
KR
KUNR
KDRG
KCIP
KGCC
KTIP
KSUM
KPKO
KVIR
KAWC
KPIN
KGIC
KRAD
KIPR
KOLY
KCFE
KMCA
KE
KV
KICC
KNPP
KBCT
KSEP
KFRD
KFLU
KVPR
KOCI
KBIO
KSTH
KMPI
KCRS
KOMC
KTBT
KPLS
KIRC
KREL
KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG
KFLO
KBTS
KSTC
KTDB
KFSC
KX
KFTFN
KNEI
KIDE
KREC
KMRS
KICA
KPAONZ
KCGC
KSAF
KRGY
KCMR
KRVC
KVRP
KSEO
KCOM
KAID
KTEX
KNUC
KNAR
KNUP
KNNPMNUC
KLIG
KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG
KCRCM
KHDP
KGIT
KNSD
KOMS
KWMM
KPAI
KHSA
KTLA
KO
KMFO
KRCM
KCSY
KSAC
KTRD
KPWR
KID
KWNM
KRIM
KPOA
KCHG
KOM
KSCI
KFIN
KMOC
KESS
KWAC
KMIG
KSEC
KIFR
KDEMAF
KPRV
KBTR
KERG
KTER
KDDG
KPAK
KRFD
KHUM
KDEV
KCFC
KWWMN
KWMNCS
KJUST
MARR
MOPS
MU
MTCRE
MNUC
MY
MASS
MCAP
MOPPS
MAR
MPOS
MO
ML
MR
MASC
MX
MD
MP
MA
MTRE
MIL
MCC
MZ
MK
MDC
MRCRE
MAPS
MV
MI
MEPN
MAPP
MEETINGS
MAS
MTS
MLS
MILI
MTCR
MG
MC
MARAD
MIK
MILITARY
MEDIA
MEPI
MUCN
MEPP
MT
MERCOSUR
MW
MASSMNUC
MQADHAFI
NZ
NATO
NG
NI
NO
NATIONAL
NU
NPT
NIPP
NL
NPG
NS
NA
NGO
NP
NSG
NDP
NAFTA
NR
NC
NH
NE
NSF
NPA
NK
NSSP
NRR
NATOPREL
NSC
NT
NW
NORAD
NEW
NV
NSFO
NAR
NASA
NZUS
OTRA
OVIP
OPRC
OPDC
OSCE
OAS
ODIP
OIIP
OFDP
OVP
OREP
OFFICIALS
OSAC
OEXC
OPCW
OIE
OIC
OFDA
OSCI
OPIC
OBSP
OECD
ON
OCII
OHUM
OES
OCS
OMIG
OPAD
OTR
PGOV
PREL
PHUM
PINR
PTER
PSOE
PINS
PARM
PK
PBTS
PEPR
PM
POLITICAL
PARTIES
PREF
PBIO
PROP
PA
PSI
PINT
PO
PKFK
PL
PAK
PE
POLITICS
PINL
POL
PHSA
PU
PF
POV
PFOR
PHALANAGE
PARTY
PARMS
PRGOV
PNAT
POLINT
PRAM
PMAR
PG
PAO
PROG
PRELP
PPA
PCUL
PSEPC
PSA
PREO
PAHO
PGIV
PREFA
PALESTINIAN
PAIGH
POSTS
PTBS
PGOVLO
PORG
PGOVE
PLN
PINF
PAS
PUNE
POLICY
PDEM
PDOV
PCI
PGOVSMIGKCRMKWMNPHUMCVISKFRDCA
PBT
PHUMPGOV
PMIL
PNG
PP
PS
PHUH
PECON
POGOV
PY
PHUMPREL
PHUS
PRL
PGOC
PNR
PGGV
PROV
PTERE
PGOF
PHUMBA
PEL
RS
RU
RW
REGION
RP
RICE
ROBERT
RSP
RUPREL
RM
RO
RCMP
RSO
RELATIONS
REACTION
REPORT
RIGHTS
ROOD
RF
RFE
RIGHTSPOLMIL
SP
SA
SY
SF
SYR
SENV
SCUL
SOCI
SNAR
SO
SU
SG
STEINBERG
SHUM
SW
SMIG
SR
SZ
SIPRS
SI
SAARC
SPCE
SARS
SN
SYRIA
SANC
SL
SCRS
SC
SENVKGHG
SAN
SNARCS
SHI
SWE
SNARIZ
SIPDIS
SEN
SNARN
SPCVIS
SEVN
SSA
SH
SOFA
SK
ST
TPHY
TU
TRGY
TI
TX
TS
TW
TC
TFIN
TD
TSPA
TH
TT
TIP
TBIO
TSPL
TZ
TERRORISM
TRSY
TN
THPY
TINT
TF
TL
TV
TK
TO
TP
TURKEY
TNGD
TBID
TAGS
TR
UP
US
UNSC
UK
UZ
UE
UNESCO
UV
UNGA
UN
UNMIK
UNO
UY
UAE
UNEP
UG
UNHCR
UNHRC
USUN
UNAUS
USTR
USNC
USOAS
UNCHR
UNCSD
UNDP
USEU
USPS
UNDC
UNDESCO
UNCHC
UNFICYP
UNC
UNODC
UNPUOS
UNCND
UNICEF
UNCHS
UNVIE
USAID
UNIDROIT
Browse by classification
Community resources
courage is contagious
Viewing cable 06BRASILIA1302, BRAZIL: VARIG'S DEATH THROES
If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs
Understanding cables
Every cable message consists of three parts:
- The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
- The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
- The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.
Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #06BRASILIA1302.
Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
06BRASILIA1302 | 2006-06-29 10:10 | 2011-01-10 00:12 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Brasilia |
VZCZCXRO4538
PP RUEHRG
DE RUEHBR #1302/01 1801000
ZNR UUUUU ZZH
P 291000Z JUN 06
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC PRIORITY 5916
RUCPDO/USDOC WASHDC PRIORITY
INFO RUEHRG/AMCONSUL RECIFE 5028
RUEHRI/AMCONSUL RIO DE JANEIRO 2359
RUEHSO/AMCONSUL SAO PAULO 7321
RUEHBU/AMEMBASSY BUENOS AIRES 4116
RUEHAC/AMEMBASSY ASUNCION 5521
RUEHMN/AMEMBASSY MONTEVIDEO 6338
RUEHSG/AMEMBASSY SANTIAGO 5609
RUEHPE/AMEMBASSY LIMA 3061
RUEHCV/AMEMBASSY CARACAS 3324
RUEHQT/AMEMBASSY QUITO 1879
RUEHLP/AMEMBASSY LA PAZ 4678
RUEHBO/AMEMBASSY BOGOTA 3817
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RUEAYVF/FAA MIAMI
RUEAYVF/FAA MIAMI ARTCC MIAMI FL
UNCLAS SECTION 01 OF 03 BRASILIA 001302
SIPDIS
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: EAIR EIND OPRC BR
SUBJECT: BRAZIL: VARIG'S DEATH THROES
REF: Brasilia 1185 and previous
(U) This cable is business-sensitive. Please protect accordingly.
¶1. (SBU) Summary. On June 23, Rio Bankruptcy court Judge Luiz Roberto Ayoub declared the bid by VARIG workers group TGV as failed since it unsurprisingly was unable to make its first required payment of USD 75 million. Judge Ayoub also said that he will now focus on the USD 485 million bid for VARIG by former subsidiary VarigLog, which is partially owned by MatlinPatterson subsidiary Volo Brasil. Coincidentally, on the same day, Brazil's civil aviation administration ANAC ended its investigation of the VarigLog sale to Volo, saying that it has determined to its satisfaction that Volo meets Brazilian foreign ownership restrictions, although that decision will ultimately lie with Brazilian tax authorities. Since June 10, VARIG's average cancellation rate has been 62.5 percent per day, and it has cancelled flights to 10 international destinations and reduced frequencies to another eight until further notice. Wait times for flights that do take off average 100-240 minutes. The company is operating an estimated 30 planes of its 65 aircraft fleet. It has been removed from the IATA clearing house, resulting in at least 11 companies' non-acceptance of VARIG-endorsed tickets. Brazilian authorities are planning for the worst, but saying little, with the military readying five aircraft to transport VARIG passengers and ANAC encouraging TAM and GOL to free up seats to VARIG ticket holders. Legal actions threaten to: hold the Rio judge accountable for his delayed acceptance of TGV's bid, place VARIG executives in the US in jail, prevent VarigLog from acquiring VARIG, and open the any potential buyer to further liability from creditors. End Summary.
SPENDING BEYOND THEIR MEANS ---------------------------
¶2. (SBU) The VARIG workers group TGV finally admitted, to the surprise of no one, that it did not have the required USD 75 million to effectuate the initial payment for the company. Rio Bankruptcy judge Luiz Roberto Ayoub then declared TGV's auction bid void. The announcement came after two days of meetings with Brazil's National Development Bank (BNDES) to negotiate a loan and a 7-hour extension. Group representatives, who have still refused to name their financial backers, hold the Judge responsible for their failure to raise the funds, blaming his delay in accepting their bid, the short amount of time given to effectuate payment, and his general handling of the whole process; they have mentioned litigation more than once.
LESS MONEY, MORE PROBLEMS -------------------------
¶3. (SBU) Oddly enough, the TGV did not blame other factors that may have played a part in discouraging financial backers. Since June 10, VARIG cancellation rates have hovered between 55-70 percent. Those flights that take off see a 100-240 minute average delay. After earlier denials to econoff by a Sao Paulo-based VARIG sales manager, IATA announced June 20 that it had removed VARIG from its clearing house, meaning VARIG-endorsed tickets for passengers whose flights are cancelled have no financial backing. IATA did not announce how much money it is owed, but said that VARIG has been in arrears since April. Other airlines are no longer obligated to take their passengers. On June 21 VARIG announced its suspension of flight operations to Milan, Munich, Madrid, Paris, New York, Los Angeles, Mexico City, Monetivideo, Assuncion and Bogota, or 72 percent of its international flights. It is has also further reduced its frequency to Miami and London to once per day. (Note: Some London flights have been cancelled.) A company spokesman said the move was precipitated by its failure to come to amicable terms with leasing companies. Many of its international flights have been cancelled through June. Such cancellation rates are understandable since the company is operating about 30 aircraft.
¶4. (U) To add injury to insult, one of Boeing's MD-11s leased to VARIG was involved in a serious incident at Brasilia's international airport on June 17, in which the middle landing gear failed to
BRASILIA 00001302 002 OF 003
initialize properly. The ensuing break in the middle wheel well damaged the fuselage and the BSB landing strip, causing a 2 hour closure of the runways at the airport. Because of lack of funding, many VARIG aircraft lay fallow or worse with no available resources to fix them or fuel them.
MONEY TALKS: VARIGLOG TO THE RESCUE? ------------------------------------
¶5. (U) During his June 23 announcement to annul the TGV bid, the judge also stated that he would now turn his attention to VarigLog's bid for VARIG. VarigLog, which has partial ownership by Volo Brasil, a MatlinPatterson (U.S. investment fund) subsidiary, offered to buy its former parent company for USD 485 million. While VarigLog had made an earlier USD 350 million bid for VARIG in April, it was rejected outright under ANAC suspicion that Volo was not fully in compliance with Brazilian laws regarding foreign investment control. In fact, during meetings with Emboffs in April, ANAC officials went far as to rule out the sale of VarigLog to Volo. However, after months of investigating, ANAC leadership conceded, also on June 23, that such a determination was not within their purview and that the Brazilian tax authorities would determine ownership. The ANAC determination coincided with press reports that VarigLog was prepared to immediately inject US 20 million into the company to assist it with short term credit problems. Thus far, VarigLog has given USD 3 million as a sign of good faith of its intentions. It plans other deposits to keep the airline going until Judge Ayoub makes a decision about sale or liquidation. Ayoub must now call a meeting with creditors to determine the viability of the bid. VARIG will once again go to auction, and one assumes, with only one buyer. TGV's failed bid automatically disqualifies it from further participation.
¶6. (U) However, two issues cast long shadows of doubt over the auction. First, the Brazilian Treasury (Receita Federal) and the Brazilian Social Security Administration (INSS) obtained an injunction against the sale until the issue of whether the money raised in a new auction would be used to pay taxes and social security debts, which total USD 1.56 billion. Second, VARIG's administrator, Deloitte, insists that the "old VARIG" continue to operate with a guaranteed 5 percent of the new VARIG formed by the buyers. According to many legal analysts, this would mean that, legally, VarigLog would assume VARIG's debt (Reftel).
THIS IS THE LAST TIME; I MEAN IT --------------------------------
¶7. (U) The reprieves that VARIG has customarily received have been from GoB entities BR Distribuidora, a Petrobras subsidiary and from airport administrator INFRAERO. These abeyances will perhaps soon end. VARIG has renegotiated a payment plan with BR Distribuidora seven times in 5 weeks, sometimes for just 24-hour periods. This is after BR spokesmen vehemently proclaimed in April, May and June that the time to support VARIG out of their own pockets had come to an end. INFRAERO once again set a firm date of July 1 when VARIG must pay its airport fees before landing in a Brazilian airport, or not be allowed to land. The date has slipped four times since April when INFRAERO first announced that it would resume charging the tax to all cairlines after a seven-month hiatus, which caused INFRAERO more than its share of financial pain. Complaints piled as regular maintenance went undone, some of which was linked to anaccident at Congonhas Airport, Brazil's busiest (Reftel).
¶8. (SBU) All the while, ANAC, which has never publicly announced its contingency plan if VARIG goes under, has pressured local carriers TAM, GOL and OceanAir to transport stranded VARIG passengers on their flights and they have accepted. On the non-announcement of a definitive plan, shares in TAM and GOL which had enjoyed upward pressure since February, fell due to negative hedging on how much absorbing VARIG's estimated 28,000 customers will cost them. ANAC did announce that all Star Alliance partners will ensure that Brazilians in foreign locations will be accommodated. Star Alliance leadership, however, corrected ANAC's announcement stating that the airline partnership is a commercial activity between VARIG and its alliance partners, not between ANAC and the Star Alliance. The BRASILIA 00001302 003 OF 003 Brazilian military has made ready five aircraft to transport VARIG passengers if they are stuck overseas without option. Brazilian diplomatic posts have notified host-country authorities to be prepared for a VARIG failure. The Brazilian Embassy in Washington has notified FAA to expect a diplomatic note petitioning for the accreditation of Brazilian airline OceanAir, a company currently with no long-haul capabilities.
AT LEAST NO ONE IS GOING TO JAIL, YET -------------------------------------
¶9. (U) Numerous current and potential legal battles surrounding VARIG's bankruptcy promise to erupt into mayhem. VARIG itself has sued the GoB for damages it believes it is owed for operating under the strict pricing rules following 9/11. (Note: TAM and other airlines have also sued; the case has not yet been decided.) ILFC, the most vociferous foreign player in the VARIG bankruptcy universe, had asked the New York Bankruptcy court judge to order prison sentences for the VARIG executives who are in the U.S. until the company returned their planes. The judge denied the prison sentence request, but did stipulate that VARIG had to ground ILFC planes and was not allowed to cannibalize, or dismantle the leased aircraft and transfer parts. Willis Lease, another aircraft company received a court injunction to prevent VARIG from using its craft. Econoff spoke to a Boeing representative who said all but one of Boeing's ten planes leased to VARIG are grounded, either because of maintenance issues or by court order. They have not yet taken possession of their aircraft. The cancellations of Boeing aircraft covered routes ensured that for now.
¶10. (U) The National Airlines Association (SNEA in Portuguese) announced on June 24 that it will now seek an injunction against the sale of VARIG to VarigLog. The association says that VarigLog has not proven that it has less than 20 percent foreign participation to qualify as a Brazilian controlled company. The Public Ministry and the Superior Court handling the government's accounts may be forced to sue INFRAERO if it offers yet another reprieve to VARIG to pay landing taxes. Currently, only VARIG is relieved from paying the fees. TAM, GOL and other airlines have complained publicly that they had to pay the reinstituted fees and thus so should VARIG. They have also threatened legal action. Now that TGV's bid has been disqualified and the group forbidden to participate in the next auction, should it happen, the group may pursue a legal case against Judge Ayoub for what it called an 'unjustified delay' that endangered its bid.
COMMENT -------
¶11. (SBU) The legal wrangling, delays, cancellations, timed announcements and misinformation surrounding VARIG's protracted failure promise to continue through the fall, if not further. Even if Judge Ayoub allows the VarigLog bid to move forward, the company has a number of legal hoops to jump through, if it so chooses. Why a company would choose to buy VARIG, with the assured promise of legal liability for past debt, is beyond us. The bigger bang for the buck is obviously to await declared failure of the airline and then swoop in and acquire assets and airport space. Judge Ayoub's continued delay in making decisions on the fate of the airline and NY Bankruptcy judge Drain's unwillingness to allow lessors to physically re-take their craft, in a sense, is killing VARIG through kindness. It is increasingly clear that pressure from the Lula administration during an election year is the only thing that could be keeping this process dragging on. We consider that the only plausible explanation for BR Distribuidora and INFRAERO's leniency on VARIG, and ANAC's consideration of a legally questionable acquisition of VARIG by Volo via VarigLog. Unfortunately for everyone, creditors and passengers included, the airline industry and Brazil's investment climate will be left to deal with the wreckage.
CHICOLA