Brazil's troubled airline Varig grounded 86 of 139 flights scheduled for Tuesday as it awaited a new auction now set for Thursday to sell the carrier and avert a potential collapse.

With bankruptcy looming for what was the flagship airline in Latin America's largest country, a spokeswoman for the government's Infraero airports authority said only three of Varig's 22 international flights would take off on Tuesday.

The remaining foreign destinations included Frankfurt, Miami and London, but even there, problems mounted.

One tourist in Germany said her travel agency canceled and refunded her Varig ticket, forcing her to scrap vacations in Brazil two days ahead of her trip.

"They told us the airline no longer exists, and that even if we travel, there's a good chance we'll get stuck in Brazil," said the tourist, who did not want to be identified.

The flight cancellations came one day after Varig's creditors rejected the latest restructuring plan, throwing the airline's fate into limbo.

But on Tuesday the judge overseeing Varig's bankruptcy proceedings said he would go ahead with an auction now set for Thursday to try to sell the airline, which is saddled with more than USD$3.2 billion in debt.

Even though a majority of creditors had voted against the restructuring plan, Judge Luiz Roberto Ayoub ruled that the auction should go ahead because the creditors holding the bulk of Varig's debt had backed the plan.

Creditors include International Lease Finance Corporation; investors who bought distressed leases originally owned by an arm of General Electric; Brazil's airports authority;, the distribution arm of state-run oil company Petrobras; and state-owned Banco do Brasil.

Varig's former cargo unit VarigLog, which hopes to buy the airline at the auction, had asked the judge to annul the creditors' meeting. It said the plan was only rejected because investors who bought leases that once belonged to GE had voted against it, an argument that the judge accepted.

VarigLog has a financial interest in Varig's survival. The cargo company has already injected about USD$14 million in the airline to keep it afloat.

Now that the auction is set to take place, a spokeswoman for Brazil's National Agency of Civil Aviation said it would likely extend an emergency plan under which other airlines in Brazil and abroad have been endorsing Varig tickets.

She also said five air force planes were ready to fly Brazilians home from abroad in case other carriers no longer honor Varig tickets and the carrier grounds more flights.

Last month, an auction to sell Varig failed after the only bidder -- representing a group of Varig employees -- did not make a USD$75 million down payment.

Varig has until July 21 to return part of its fleet to leasing companies.