Combining the fleets and networks of Azul and compatriot Gol is likely the only pathway to creating the most dominant airline in Brazil and competing more robustly throughout Latin America against Chile’s LATAM Airlines Group.
The carriers’ networks also contain minimal overlap, with a mix of domestic and international strengths that could prove complementary.
For now, the potential benefits of such an airline tie-up will go unrealised. Abra Group has terminated Azul-Gol tie-up discussions, though the Brazilian carriers may yet revisit such a deal in the future.
Gol’s parent appeared to leave the door open to future talks by asserting last week that it still believed in the “merits” a combination with Azul.
The companies never indicated whether Azul would become a member of Abra, or Azul and Gol would form a separate holding company at least partially owned by Abra.
Talks of joining the Brazilian airline operations stalled after Azul entered Chapter 11 bankruptcy protection in late May. The deal has not been revisited in the past few months, with Abra’s decision on 25 September to officially shut down discussions coming as a formality.
Adrian Neuhauser, Abra chief executive’s, said in June that an Azul-Gol combination was still on the table even after Azul filed for bankruptcy. He noted then that creating a larger entity could help overcome some of the challenges of operating in the Brazilian market.
“The industry in Brazil is not healthy,” he said. “It reinforces [the] core point that consolidation is good.”
BANKRUPTCY COMPLICATES CONSOLIDATION
Azul’s Chapter 11 filing came as something of a surprise, as the company had avoided doing so in the years following the Covid-19 pandemic and had earlier this year completed a self-supervised restructuring process, which it declared as successful.
It also reported strong results and an upbeat outlook during the seasonally strong first quarter, including a R$783 million ($139 million) first-quarter profit, compared with its R$1.1 billion loss during the same three months of 2024. Though last year was a difficult one for Brazil’s airline sector, Sao-Paulo based Azul did not show signs of acute crisis immediately leading to its bankruptcy filing.
But Azul was struggling to rid itself of lingering debt and faced several challenges – namely, lack of aircraft and engine availability, operational disruptions from severe weather and devaluation of the Brazilian real.
Azul entered Chapter 11 protection with backing from major US carriers American Airlines and United Airlines. The process has involved securing new financing and shedding future lease commitments with Irish aircraft lessor AerCap.
The carrier recently filed several motions in the US Bankruptcy Court for the Southern District of New York to extend time for voting on its reorganisation plan.
Gol also had a difficult year in 2024 but appears to be putting its own Chapter 11 restructuring process in the rear-view mirror, reporting a nearly 20% year-on-year increase in capacity in the second quarter, and second-quarter revenue surged 23% year-on-year to R$4.8 billion.
The Rio de Janeiro-based carrier says it is gaining a stronger foothold in the Latin American market after emerging with a new financial structure June. Providing some cause for optimism, Gol expects to finally clear an engine-maintenance backlog on its fleet of Boeing 737-700s and -800s and return all aircraft to operation by January.
Though Abra appears to believe the airlines would be strong together, Azul and Gol will continue as separate operations for the foreseeable future.
Both will likely report third-quarter financial results in mid-November, shining light on what is typically a weaker period for air travel in Latin American.
