After avoiding judicial restructuring for months, Azul joins Chapter 11
It took months and months to find a negotiated way out, but Azul Linhas Aéreas had no other option but to file for Chapter 11, the United States bankruptcy legislation.
This is the same path that other major South American airlines have taken in recent years, including Avianca, LATAM and Gol.
LATAM filed for this process in 2020, amid the Covid-19 pandemic. The process lasted until the end of 2022 and since then the Chilean company has shown positive results.
Gol Linhas Aéreas announced its filing for judicial recovery in January of last year, amid growing debts, especially with lessors of its aircraft.
After initial difficulties, the Brazilian airline, now part of the Abra Group, had its reorganization plan approved this month by the New York Bankruptcy Court, the same court to which Azul has now appealed.
The airline founded by David Neeleman tried to resist and even propose aggressive offers to take over its rivals, but in the end it itself needed help.
For a long time, Azul’s management negotiated agreements with creditors and partners in order to extend its commitments while trying to increase its revenues.
“Azul’s case is different”, says the company
Despite seeking legal protection, Azul claims that its case is “different” from other companies since it “entered the process with agreements with many of its main partners”.
According to the company, it secured US$1.6 billion in DIP financing that will pay off part of the existing debt and provide US$670 million to reinforce its liquidity. The company also claims that it will eliminate approximately US$2 billion in debt.
The loan will be repaid through the issuance of equity rights. Azul will also receive up to US$300 million in investment from its partners American Airlines and United Airlines.
AerCap, the lessor of most of its fleet, has declared its support for the process. “Together with Azul, we are the largest owners of Embraer E2 commercial aircraft, supporting the Brazilian aviation industry like no other,” said Aengus Kelly, the company’s CEO.
“Azul continues to fly – today, tomorrow and into the future. These agreements mark a significant step in the transformation of our business, as they will allow us to emerge as industry leaders in key areas of our business,” said John Rodgerson, Azul’s CEO.
About the Author
Ricardo Meier
Creator of the website that started in 1996 as a magazine. He also writes on Brazilian websites AUTOO, MOTOO and MetrôCPTM.
