Brazil ministry requests Vasp license extension

The Brazilian defense ministry said on Friday it had requested the president extend the flying license of indebted airline Vasp for six months after it presented a business plan.

Defense Minister Jose Viegas had warned on Wednesday that Brazil's fourth-largest airline ran the risk of having its planes grounded if it did not present a plan to pay its overdue debts after at least one creditor requested the carrier be declared bankrupt.

Viacao Aerea Sao Paulo's (Vasp) flying license is scheduled to expire on Sunday.The defense ministry said it had also made the request to President Luiz Inacio Lula da Silva because flight schedules had been adjusted after Vasp grounded six Boeing 737-200 jets that had reached the end of their useful lives. Such requests are seldom turned down by the president.

The airline had also requested to import half a dozen Boeing 737-300 to replace the grounded planes, the ministry said. The airline currently has 22 planes flying.

This week Celma, a unit of General Electric Co., said it had filed a request with a Brazilian court that the airline be declared bankrupt because of unpaid debts. It did not say how large the debts were.A spokeswoman from Vasp declined comment on the company's debt situation.

Most of Brazil's airlines have suffered in recent years as economic downturns have hit demand and depreciation of the local currency has magnified their dollar-denominated debts and costs, such as jet fuel, leased aircraft and parts.

Brazil's flagship airline Viacao Aerea Rio-Grandense (Varig) has debts of more than $2 billion. Most of Varig's debts are to government-run firms, prompting some analysts to charge that the firm continues to exist thanks to indirect state subsidies because the government does not call in its debts.Viegas repeated previous statements that the government was not going to bail out private sector firms.

Earlier, Carlos Wilson de Campos, the president of state airport authority Infraero, said the government would draw up a rescue package for the airlines in November, which could include capitalization of Varig and Vasp.But he added that the government would not bail out the two companies.

(From Reuters, October 08, 2004)

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