

Currently released so far... 12559 / 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
2011/05/01
2011/05/02
2011/05/03
2011/05/04
2011/05/05
2011/05/06
2011/05/07
2011/05/08
2011/05/09
2011/05/10
2011/05/11
2011/05/12
2011/05/13
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 Niamey
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 Sapporo
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
AR
AF
ASEC
AMBASSADOR
AS
AJ
AM
AORC
AEMR
ASEAN
AFFAIRS
AFIN
AMGT
AODE
APEC
AE
ABLD
ACBAQ
APECO
AFSI
AFSN
AY
AO
ABUD
AG
AC
APER
AU
AMED
ATRN
ADPM
ADCO
ASIG
AL
ASUP
ARF
AUC
ASEX
AER
AVERY
AGRICULTURE
ACOA
AADP
ASCH
AA
AFU
AN
AID
ALOW
AINF
AMG
AIT
ANET
AGAO
AROC
ASECKFRDCVISKIRFPHUMSMIGEG
AORL
AMCHAMS
ACS
APCS
ADANA
AECL
ACAO
AORG
AGR
ACABQ
AGMT
AX
AMEX
ADM
AFGHANISTAN
AZ
AND
ARM
AQ
ATFN
BR
BK
BL
BA
BO
BRUSSELS
BM
BEXP
BU
BG
BB
BTIO
BF
BD
BBSR
BIDEN
BX
BP
BE
BH
BT
BY
BILAT
BWC
BN
BMGT
BTIU
BC
CI
CU
CO
CS
CVIS
CA
CJAN
CARICOM
CB
CASC
CE
CH
CN
CONDOLEEZZA
CMGT
CWC
CW
CG
CACS
CY
CPAS
CFED
CSW
CIDA
CIC
CITT
CBW
CONS
CD
CLINTON
CHR
CACM
CDB
COE
CDG
CDC
CAN
CR
CF
CT
CODEL
CJUS
CTM
CM
CLMT
CBC
COUNTERTERRORISM
CAPC
CAC
COUNTER
CV
CL
CBSA
CNARC
CEUDA
COM
CROS
CIA
CARSON
COPUOS
CTR
CICTE
COUNTRY
CBE
CIS
CKGR
CVR
CITEL
CLEARANCE
ECA
EU
ENRG
EPET
ETTC
ETRD
ELN
ELAB
EC
EFIN
ECON
EFIS
ELTN
EAGR
EIND
EWWT
EMIN
EINV
EAID
EG
EUN
ECPS
ETRDEINVECINPGOVCS
ENGR
ENIV
ECIN
EAIR
EI
ECUN
EFTA
ENGY
ECONOMICS
ES
ELECTIONS
EN
EIAR
ET
EINDETRD
EUR
EZ
EREL
ER
ECONEFIN
EINT
EURN
EDU
ETRDEINVTINTCS
ECIP
EFIM
EAIDS
EK
EPA
ENVR
EINVETC
ETRC
ENVI
ECONCS
ECONOMIC
EXTERNAL
EINVECONSENVCSJA
EUMEM
ETRA
ESA
ECINECONCS
EAIG
ETRO
ETRDECONWTOCS
EUREM
ESENV
ETRN
ENNP
EFINECONCS
EEPET
ENERG
EUC
EUNCH
EXIM
ERD
ERNG
EINVEFIN
ETC
EAP
ECONOMY
EINN
EXBS
IIP
IC
IR
IN
IAEA
IS
IT
IMF
IBRD
IZ
IWC
ISRAELI
INTERPOL
IO
ISLAMISTS
ITALY
ITALIAN
IRAQI
ILO
IPR
IQ
IV
IRS
INRB
ICAO
IMO
ID
IZPREL
IRAJ
ICTY
ICRC
IAHRC
ITF
INR
IGAD
ILC
ITU
IF
ITPHUM
IL
INTERNAL
ISRAEL
IACI
ICJ
ITRA
INMARSAT
ICTR
IA
IEFIN
INTELSAT
IBET
INRA
INRO
IDP
INDO
IRC
IDA
ITPGOV
IEA
KPAO
KCRM
KNNP
KCOR
KIRF
KISL
KSCA
KDEM
KDEMAF
KZ
KBTR
KUNR
KMDR
KRVC
KPAL
KTIA
KV
KJUS
KOMC
KTFN
KWBG
KTIP
KMPI
KSUM
KIRC
KE
KIPR
KWMN
KFRD
KSEP
KN
KOLY
KPKO
KIDE
KMRS
KFLU
KSAF
KGIC
KRAD
KU
KHLS
KOCI
KSTH
KS
KGHG
KAWC
KICC
KG
KSPR
KPRP
KDRG
KGIT
KVPR
KGCC
KSEO
KMCA
KSTC
KBIO
KHIV
KBCT
KPAI
KICA
KTDB
KACT
KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG
KHUM
KFLO
KREC
KSEC
KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG
KPIN
KCOM
KESS
KDEV
KCFE
KNUC
KAWK
KPLS
KWWMN
KCIP
KPRV
KHDP
KTEX
KFIN
KOM
KBTS
KCRS
KNPP
KWNM
KRFD
KVIR
KLIG
KMIG
KDDG
KRGY
KFSC
KR
KMOC
KPAONZ
KNAR
KIFR
KCGC
KID
KSAC
KAID
KNSD
KWMNCS
KCMR
KO
KNEI
KPOA
KTER
KOMS
KPAK
KTBT
KWMM
KWAC
KHSA
KX
KMFO
KPWR
KRIM
KSCI
KVRP
KENV
KCRCM
KNUP
KNNPMNUC
KERG
KTLA
KCSY
KTRD
KJUST
KRCM
KCFC
KCHG
KREL
KFTFN
MARR
MX
MOPS
MNUC
MZ
MASS
MEETINGS
MG
MW
MIL
MTCRE
MCAP
MAS
MO
MTCR
MD
MK
MP
MY
MR
MT
MCC
MIK
MU
ML
MARAD
MA
MAPS
MV
MERCOSUR
MASC
MPOS
MILITARY
MDC
MQADHAFI
MEPP
MRCRE
MEDIA
MAPP
MTRE
MEPN
MI
MC
MUCN
MAR
MASSMNUC
MOPPS
MTS
MLS
MILI
MEPI
NATO
NL
NZ
NI
NU
NO
NPT
NRR
NA
NATIONAL
NIPP
NAFTA
NT
NS
NE
NASA
NSF
NP
NAR
NV
NORAD
NG
NSSP
NW
NK
NDP
NR
NATOPREL
NEW
NPA
NPG
NSG
NSFO
NGO
NSC
NH
NZUS
NC
OFDA
OTRA
OPRC
OIIP
OAS
OPDC
OVIP
OEXC
OPIC
OSCE
OPCW
OREP
OFFICIALS
ODIP
OECD
OMIG
OFDP
OBSP
OIE
OSCI
OES
OPAD
OVP
OHUM
OIC
ON
OCII
OCS
OTR
OSAC
PREL
PGOV
PINR
PTER
PARM
PHUM
PA
PBTS
PINS
PM
PREF
PHSA
PK
POL
PL
PE
PFOR
PALESTINIAN
PUNE
PGOVLO
PAO
POLITICS
PO
PHUMBA
PSEPC
PNAT
PNR
PROP
POLINT
PGOVE
PROG
PHALANAGE
PARTY
PDEM
PECON
PROV
PSOE
PU
POGOV
PMIL
PINL
PHUMPREL
PGIV
PBT
PAK
PP
PGOC
PY
PLN
PMAR
PHUH
PBIO
PF
PRL
PG
PHUS
PTBS
PRAM
POV
PEL
PAS
POLICY
PGGV
POLITICAL
PARTIES
PCUL
PSA
PDOV
PCI
PREO
PAHO
PGOVSMIGKCRMKWMNPHUMCVISKFRDCA
PHUMPGOV
PREFA
PSI
PAIGH
POSTS
PARMS
PTERE
PRGOV
PORG
PS
PGOF
PKFK
PEPR
PPA
PINT
PRELP
PINF
PNG
RU
RS
RICE
RW
RCMP
RO
RFE
RP
RIGHTS
RIGHTSPOLMIL
ROBERT
REGION
RUPREL
RF
RELATIONS
RM
REACTION
ROOD
REPORT
RSO
RSP
SNAR
SENV
SOCI
SCUL
SY
SR
SU
SO
SP
SA
SZ
SF
SMIG
SW
SIPDIS
STEINBERG
SN
SNARIZ
SG
SNARN
SSA
SK
SI
SPCVIS
SOFA
SC
SL
SARS
SNARCS
SIPRS
SYR
SANC
SEVN
SWE
SHI
SEN
SHUM
SYRIA
SH
SPCE
SAARC
SCRS
SENVKGHG
SAN
ST
TW
TRGY
TU
TPHY
TBIO
TX
TN
TSPL
TC
TZ
TSPA
TS
TF
TI
TIP
TH
TINT
TNGD
TP
TD
TFIN
TAGS
TK
TL
TV
TT
TERRORISM
TR
THPY
TO
TRSY
TURKEY
TBID
UK
UP
US
UNSC
UNHCR
USEU
UNGA
UG
UY
UNESCO
UN
USTR
USOAS
UZ
UNODC
UNCHS
UNFICYP
UNEP
UNIDROIT
UNHRC
UNDESCO
UNMIK
UNDP
UNC
UNO
UNAUS
UV
UNICEF
UNCHR
UNDC
UNCHC
UNPUOS
USUN
USNC
UNCSD
UNCND
USPS
USAID
UE
UNVIE
UAE
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 10:00 | 2011-01-10 00:00 | 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