Brazilian airline Azul saw its U.S.-listed shares plummet by around 40% in premarket trading after filing for Chapter 11 bankruptcy protection in the United States. This marks a 70% drop in share value for the year, underscoring the severe financial strain the airline has faced since the pandemic.
Despite extensive restructuring efforts, the filing reflects Azul’s inability to manage its predominantly COVID-era debt. The move may derail a potential merger with rival Gol, further complicating the carrier’s recovery prospects.
Azul Secures Stakeholder Support Amid Debt Woes, Joins Regional Airline Bankruptcy Trend
Azul outlined a major restructuring plan that includes $1.6 billion in financing during the process, elimination of over $2 billion in debt, and up to $950 million in equity financing upon emergence from bankruptcy. CEO John Rodgerson emphasized the opportunity to clean up the company’s debt-heavy balance sheet and confirmed that Azul had secured agreements with key stakeholders, including bondholders, aircraft lessor AerCap, and strategic allies United and American Airlines.
Azul Files for Chapter 11 as Pandemic Debt Mounts, Jeopardizing Gol Merger and Investor ConfidenceThe airline’s current predicament is part of a broader trend in Latin America, where major carriers such as Aeromexico, Avianca, Gol, and LATAM have previously sought bankruptcy protection. In 2023, Azul attempted to reduce its debt burden by negotiating a $550 million debt-for-equity swap with lessors and raising an additional $500 million from bondholders.
However, persistent issues like high operational costs, delayed aircraft deliveries due to supply chain disruptions, and a depreciated Brazilian real continued to weigh heavily on the company.
Mounting Debt, Downgrades, and Merger Doubts Cloud Azul’s Path to Recovery
Azul’s restructuring is supported by an equity rights offering backstopped by United and American Airlines, pledging up to $300 million to repay debtor-in-possession financing. Still, financial pressures have been intensifying. By Q1 2025, Azul’s net debt had ballooned by 50% year-on-year to 31.35 billion reais ($5.6 billion), and its leverage ratio worsened from 3.7 to 5.2.
A recent underwhelming capital increase further eroded investor confidence, leading to credit rating downgrades by Fitch and S&P due to heightened default risks.
Despite the bankruptcy proceedings, Azul intends to maintain normal operations and sales. CEO Rodgerson expressed confidence in completing the restructuring process by year-end. However, the Chapter 11 filing casts serious doubt on a planned merger with Gol, which was envisioned as a transformative move to create a dominant airline in Brazil. The filing underscores the enduring impact of the pandemic on the aviation industry and the complex path to financial recovery for Azul.
