Broken Gear Adds Insult To Ailing Airline

As if bankruptcy and $3.5 million in debt wasn't enough for Varig, Brazil's oldest airline, a piece of the landing gear of a company MD-11 (file photo of type, below) apparently fell off Friday on landing in the capital city of Brasilia, closing the runway for nearly two hours.

None of the 108 passengers onboard was injured, according to the Associated Press. Officials with Varig -- or more formally, Viacao Aerea Rio-Grandense SA -- said workers were examining the defective part, which was scheduled for maintenance in 2009.

Details are sketchy about the incident, which presumably did not involve one of the 10 initially ordered by the New York Supreme Court to be returned to creditors by June 16.

Varig cancelled over 100 flights last week as court-imposed deadlines loomed and suitable buyers remained aloof. On Friday, the airline cancelled 30 more flights. Varig claims the cancellations resulted from bad weather and regular plane maintenance.

On June 13, New York Bankruptcy Judge Robert Drain gave Varig a bit of breathing room to reorganize by extending until June 21 an order that blocks leasing companies from seizing as many as 25 of Varig's jets. Drain turned down pleas from lessors, including Wells Fargo Bank and Boeing, to lift the injunction.

Separately, however, Drain told Varig to pay International Lease Finance Corp. $3.8 million for leases on 11 aircraft or risk having them seized, refusing to extend an order first entered almost a year earlier.

A last-minute bid from TAP SGPS SA, Portugal's state-owned carrier, in partnership with Air Canada and Brookfield Asset Management Inc., could actually be the saving grace for the near-defunct airline. But, TAP Chief Executive Officer Fernando Pinto said a bid would only come if a Brazilian bankruptcy judge rejected the earlier offer of a Varig employee-led group.

"It's now very unlikely Varig will stop flying this week," airline industry analyst Amaryllis Romano told Bloomberg. "The bid increases the chance of survival because it's being made by companies in the same industry and that have capital to invest in Varig right away."

Porto Alegre, Brazil-based Varig needs cash to pay fuel vendors and equipment lessors, Romano said. And, the president of Brazil's ground workers union says the airline's 9,000 workers haven't been paid since April. A purchase by a group with a strong financial backing would help keep the airline flying.

The carrier could lose more than half of its fleet as early as next week unless it makes payments on its leased aircraft or gets another stay-of-execution from the New York judge.

FMI: www.varig.com, www.flytap.com/Portugal/en/Homepage/, www.aircanada.com