Azul, Gol inch nearer to potential tie-up to kind main Brazil airline

By Gabriel Araujo

SAO PAULO (Reuters) – Azul and Gol, two of Brazil’s largest airways, are shifting a step nearer to a sweeping merger that might create a dominant provider in Latin America’s No. 1 economic system, a securities submitting confirmed on Wednesday.

The union of the 2 firms, which follows months of talks and market hypothesis, would maintain roughly 60% of the home market, far surpassing the native unit of Chile-based LATAM Airways (NYSE:LTM).

Azul Chief Govt John Rodgerson stated in an interview that the mixed provider, which might proceed working two separate manufacturers regardless of the mixed possession, can be “a nationwide champion.” 

Looking for to rebuff potential competitors issues, Rodgerson pointed to different nationwide carriers with dominant shares of their dwelling markets, together with LATAM in Chile, Lufthansa in Germany and IAG within the UK.

“So these different nations perceive the significance of getting a powerful airline that may develop,” he informed Reuters. “Particularly a powerful firm which buys native plane.”

Azul’s fleet contains regional jets from Brazil’s Embraer in addition to Airbus single- and twin-aisle planes, whereas Gol flies solely Boeing (NYSE:BA) 737 plane. 

He added that the transfer would permit for bigger connectivity and decrease price of capital.

Azul and Abra Group, the bulk investor in Gol and Colombia’s Avianca, had been in talks since final yr to “discover alternatives,” searching for to strengthen their operations to face difficult instances for the trade within the area.

They’ve now signed a nonbinding memorandum of understanding aimed toward combining Azul and Gol, the primary of a number of steps on the trail to finishing a deal, the securities submitting confirmed.

It additionally marks the start of the method to acquire regulatory approvals for a mixture, together with from antitrust regulator CADE. 

Latin American airways have been dealing with monetary hurdles within the wake of the COVID-19 pandemic, with most pressured to restructure, a number of in chapter, as they wrestle with excessive debt.

Gol has been underneath Chapter 11 chapter reorganization in america since early 2024, whereas Azul lately needed to strike offers with lessors to scrap obligations in trade for an fairness stake, and with bondholders to acquire contemporary financing.

A mixture would comply with Gol’s exit from chapter proceedings.

Gol earlier within the day launched a brand new five-year strategic plan laying the groundwork for it to exit Chapter 11, which it expects to occur by Might.

The mixed firm, Rodgerson stated, would come with three board members appointed by Azul, three appointed by Abra, and three impartial members. Azul would title the corporate’s chief govt and Abra its chairman.

Analysts have famous the transaction may very well be advanced because it requires regulatory approvals, however acknowledge that market turbulence, together with the sharp depreciation of Brazil’s actual in latest months, may need given the deal a lift.

Azul and Gol, which already function in codeshare, would guess on their complementary networks to acquire antitrust approval, noting that they’ve roughly 90% complementary and non-overlapping routes.

Gol focuses on huge cities similar to Sao Paulo, Rio de Janeiro and Brasilia, whereas Azul has a extra dispersed community.

Rodgerson stated the carriers’ completely different fleets would put them in a stronger place to barter with lessors, producers and suppliers.