Judge Roberto Ayoub concluded that the auction could go ahead on Thursday despite opposition from leasing companies that had rejected a proposed restructuring plan and buyout offer at a creditors' meeting on Monday.

The judge rejected votes representing General Electric Aviation Services, which had already sold its shares to JP Morgan, and so was no longer a creditor, he said.

The new auction had been postponed so that Deloitte consultants could study the almost half-a-billion-dollar offer from Volo do Brasil, a US-Brazilian consortium, for the carrier. The consortium includes US investment fund Matlin Patterson and Brazilian investors.

The court previously ruled that Volo's offer was more promising than the prospect of liquidating the company.

Varig has been operating under bankruptcy protection since June 2005. Ayoub previously canceled the ailing airline's sale to a group of Varig employees after the bidder failed to make a 75-million-dollar deposit on time.

Volo do Brasil had deposited 20 million dollars with the court, which kept the carrier flying.

More than half of Varig's domestic and international flights have been canceled for nearly a month.

The airline, Brazil's biggest international carrier, is saddled with more than three billion dollars in debt and is on the brink of collapse.

The last time Varig turned a profit was in 1995. It still controls 60 percent of Brazil's international routes, to 21 foreign destinations. But rivals Tam and Gol have now left Varig with only 16 percent of the domestic market.

(Published Servihoo.com, July 19, 2006)
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