Brazilian carrier Azul has filed for Chapter 11 bankruptcy protection.
The carrier enters the bankruptcy process with a prearranged restructuring package that includes support from longtime partner and investor United Airlines as well as a new partner, American Airlines.
Azul will continue to fly during the Chapter 11 process, during which it plans to wipe out more than $2 billion in debt. While in Chapter 11, Azul, which operates approximately 300 direct routes with a fleet of 226 aircraft, will honor all tickets, loyalty points and agency commissions. The airline is flying eight U.S. routes this month, all to either Fort Lauderdale or Orlando, and has a codeshare and loyalty program partnership with United.
Under Azul's prearranged restructuring package, it will receive financing of $1.6 billion to pay off a portion of its debt and to provide it with $670 million of liquidity during restructuring. Upon exiting Chapter 11, the carrier plans to raise $650 million through an offering of discounted shares to exiting investors. In addition, American and United have committed to equity investments that combined will be $200 million to $300 million.
"With a collaborative approach and the support of our stakeholders, we have made a strategic decision to pursue a voluntary financial restructuring as a proactive move to optimize our capital structure -- which was burdened by the Covid-19 pandemic, macroeconomic headwinds and aviation supply chain issues," Azul CEO John Rodgerson said about the restructuring. "Our strategy is not just about financial reorganization. By using this process, we believe that we are creating a robust, resilient, industry-leading airline."
American's participation in the restructuring is especially noteworthy since it has not previously been an Azul partner. American is a partner and investor in rival Brazilian carrier Gol.
Azul and Gol entered into a nonbinding memorandum of understanding in January to explore a merger, which would make the combined entity the largest airline in Brazil, cumulatively dwarfing Latam.
Gol, whose majority owner Abra Group is also the controlling owner of Colombia-based Avianca, is currently winding down its own restructuring process. Gol announced last week that it expects to emerge from the Chapter 11 process next month. Gol has been in Chapter 11 since early 2024.
In a statement, American said that Gol remains a key partner and also noted its partnership with Chilean discount carrier JetSmart. It did not provide specifics on how it would partner with Azul.
"Our service, including that of our partners GOL and JetSmart, combined with the strength and breadth of Azul's network, will provide our customers another unique option for traveling between the Americas and even more connectivity in Brazil and throughout South America," chief strategy officer Stephen Johnson said. "We are excited to support this process and to be part of Azul's future."