The Brazilian airline Azul has filed for Chapter 11 bankruptcy protection under U.S. law, according to a statement submitted to stock market regulators this Wednesday. The move marks a decisive step in its efforts to reorganize accumulated debt, largely incurred during the most critical months of the COVID-19 pandemic.
A Deep Restructuring to Survive
Despite previous attempts at renegotiation, Azul now joins the list of Latin American airlines that have turned to bankruptcy protection as a direct result of the collapse the aviation sector faced at the onset of COVID-19.
The reorganization plan focuses on three key pillars:
- Secured financing of $1.6 billion during the process.
- The elimination of over $2 billion in outstanding obligations.
- An additional commitment of up to $950 million in capital contributions once the process is completed.
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John Rodgerson, CEO of Azul, acknowledged that the debt burden had become unsustainable: “We had too much debt on our balance sheet, primarily from COVID. Now we have the opportunity to wipe it clean entirely,” he said in an interview with Reuters.
Strategic Support
To strengthen its position during the restructuring, Azul has secured agreements with key players in its financial ecosystem:
- Current bondholders
- Aircraft lessor AerCap
- Its strategic partners in North America: United Airlines and American Airlines
These allies back the reorganization process, reflecting confidence in the future of the Brazilian airline.
The proceedings could impact a potential merger with Gol, another competitor in the Brazilian market. This option, previously suggested by industry analysts, may now be put on hold due to Azul’s current financial situation.
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