Varig aircraft lessor requests termination of preliminary injunction

By Caroline Salls

Pittsburgh, Aug. 23 - Varig SA aircraft lessor Willis Lease Finance Corp. requested termination of the company's preliminary injunction, which prohibits a lawsuit, action, enforcement process or proceeding or claim or demand of reclamation for any leased aircraft, according to a Tuesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The injunction also keeps parties, including creditors, employees and utility providers, from terminating contracts for goods and services that would "threaten the contemplated restructuring."

According to Willis, the injunction provides that aircraft lessors can initiate an emergency hearing on the injunction if Varig remains in default on aircraft payments five days after notice.

Willis said Varig has not cured $904,766 in defaults on eight Willis engines. Also, Willis said the lease on one engine has expired, but Varig has not returned the engine.

In the motion, Willis said Varig will probably claim that its inability to pay aircraft lessors results "not from its own failures, but because Brazilian law does not afford the [company] relief from pre-bankruptcy liens on accounts receivable."

"The U.S. bankruptcy law should not become an instrument of private aid for another country's flag airline," Willis said in the motion.

Varig, a Rio de Janeiro, Brazil-based air carrier, filed for Section 304 bankruptcy on June 20. Its case number is 05-14400.

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