Varig's buyers won't be saddled with its �3.5bn debts

But the workers, who offered $449m (�244m) for the beleaguered firm, have been given until Wednesday to clarify how they would finance the deal.

The consortium was the only bidder for Varig, and its offer was well below the minimum price of $860m.

Some analysts have said it is unlikely the workers have the financial backing.

'Do everything possible'

The proposal by the NV Participations, representing the TGV (Trabalhadores do Grupo Varig) employees' association, involves paying $124.5m in cash and issuing debentures - a form of unsecured bond - to cover the rest of the cost.

Judge Roberto Ayoub said that another auction was a possibility if the workers did not come up with the money .

"The judiciary will do everything possible to save this company and any other company in a similar situation," he said.

The struggling carrier's domestic and international assets, including 52 aircraft, are at stake.

But the new owner would not have to assume any of the airline's estimated $3.5bn debt.

Competition

Varig has been under bankruptcy protection for a year.

It was the top airline in Brazil until 2004, but was then overtaken by TAM and later by Gol.

The airline has suffered financial problems for years because of rising costs and growing low-cost competition.

It now has just 16.7% of the domestic market, but remains the leading Brazilian carrier internationally, with a 66.4% share.

Last year it cut 13% of its 12,000-strong workforce in an effort to stave off bankruptcy.

Since 1945, Varig has been majority-owned by the non-profit Ruben Berta Foundation.