A Brazilian court ruled Tuesday that the government must pay millions of dollars in compensation to financially strapped Varig airlines for losses the carrier incurred during the administrative 1984-1992 freeze on airfares.
The case had dragged on for years but finally a Federal Court ruled 4-1 in favour of Varig. Government lawyers have yet to say whether they will appeal. The Justices could order a payment to Varig of more than 2 billion Reales (close to $725 million).
Varig, like other Brazilian carriers, has gone to court seeking compensation for losses experienced during the compulsory fares freeze imposed between 1985 and 1992 under Presidents Jose Sarney and Fernando Collor de Mello.
The airlines argue that during the almost eight years when fares were frozen, the price of fuel, spare parts and other supplies rose several times, causing financial strains.
The compensation package could still save Varig from the verge of bankruptcy with debts amounting to an estimated 7 billion Reales (around $2.5 billion). For years, the Brazilian government has been looking at alternative solutions to the 77 years old Varig which has become identified world wide as Brazil's flag carrier.
Among other options under consideration is a government takeover of the company with the purpose of restructuring management, cutting jobs, streamlining the company formally belonging to the Rubens Berta Foundation that is mostly under control of the staff from Varig.