Azul S.A. (B3: AZUL4; NYSE: AZUL), Brazil's largest airline by flight departures and destinations, announced today it has initiated a proactive financial restructuring process through Chapter 11 in the United States. The move follows comprehensive Restructuring Support Agreements with key financial stakeholders, including bondholders, its largest lessor AerCap, and strategic partners United Airlines and American Airlines.
The agreements are designed to significantly deleverage the Company, eliminate over US$2.0 billion of debt, and secure approximately US$1.6 billion in new financing during the process. Upon emergence, Azul contemplates further equity financing of up to US$950 million.
Azul emphasized that its operations will continue normally throughout the process, with commitments to customers, crewmembers, and partners remaining a priority.
"Azul continues to fly – today, tomorrow, and into the future," stated John Rodgerson, CEO of Azul. "These Agreements mark a significant step forward in the transformation of our business – one that enables us to emerge as an industry leader... Our strategy is not just about financial reorganization. By using this process, we believe that we are creating a robust, resilient, industry-leading airline."
Chapter 11 allows companies to restructure their balance sheet while maintaining ordinary business operations. Azul aims to reduce lease obligations and optimize its fleet, leading to a more sustainable business and capital structure.
AerCap, a key partner, expressed confidence in Azul's ability to emerge stronger. Aengus Kelly, CEO of AerCap, highlighted their shared ownership of Embraer E2 commercial aircraft, supporting the Brazilian aviation industry.
Azul's restructuring is unique due to pre-existing agreements with major stakeholders, streamlining the process. The secured debtor-in-possession (DIP) financing of approximately US$1.6 billion will partially repay existing debt and provide around US$670 million in new liquidity. This DIP financing is expected to be repaid upon emergence through an Equity Rights Offering of up to US$650 million, backstopped by financial partners, and a potential additional equity investment of up to US$300 million from United Airlines and American Airlines.
American Airlines Vice Chair and Chief Strategy Officer Stephen Johnson voiced strong support, stating, “We are confident that Azul’s plan to strengthen its future will be extremely positive for the Brazilian aviation market and travelers to, from and across Brazil.” Johnson also reiterated American's commitment to its partnership with GOL, emphasizing their combined loyalty programs and network reach.
Azul has filed customary motions to ensure continued operations, including crewmember compensation, customer commitments (tickets and loyalty programs), and payments to critical vendors.
