Varig has received bids from 17 companies interested in buying its flight operations, including rivals TAM, Gol, OceanAir and WebJet, according to Merrill Lynch.Under a plan put forward earlier this month (ATWOnline, May 10), Varig's flight operations will be separated from its commercial and nonairline activities and sold separately. The minimum bid for the entire flight operation is $860 million, which includes 46 aircraft. However, the international and domestic arms could be sold separately, with a minimum bid of $700 million for the domestic arm including 30 aircraft.

Brazil's National Development Bank, which is charged with evaluating the feasibility of the plan, has said it will provide up to $250 million in financing to the winning bidder.

Also, according to Merrill Lynch, Brazil's Supreme Court recently upheld a ruling ordering the government to pay Varig R$3 billion ($1.4 billion) in compensation for losses suffered by the airline "due to a government policy to control airfares from 1985-1992 as part of its plan to control inflation."

Merrill said further that Petrobras, the state-owned fuel supplier, is seeking to reverse a separate lower court ruling requiring it to provide Varig with fuel without guarantee of payment.