Azul, Gol a little closer to a potential tie-up to form a major Brazilian airline Reuters
Gabriel Araujo
SAO PAULO (Reuters) – Azul and Gol, Brazil’s two biggest airlines, are closing in on a comprehensive merger that would create the dominant carrier in Latin America’s No. 1 economy, a securities report showed on Wednesday.
The merger of the two companies, which followed months of negotiations and market speculation, would hold roughly 60% of the domestic market, far outstripping the local unit of Chile-based LATAM Airlines (NYSE: ).
Azul CEO John Rodgerson said in an interview that the combined carrier, which will continue to operate two separate brands despite shared ownership, will be a “national champion.”
Seeking to dismiss potential competition concerns, Rodgerson pointed to other national carriers with dominant shares in their home markets, including LATAM in Chile, Lufthansa in Germany and IAG in the UK.
“So those other countries understand the importance of having a strong airline that can grow,” he told Reuters. “Especially a strong company that buys local aircraft.”
Azul’s fleet includes regional jets from Brazil’s Embraer as well as single- and twin-aisle Airbus planes, while Gol flies only Boeing (NYSE: ) 737s.
He added that this move will enable greater connectivity and a lower cost of capital.
Azul and Abra Group, the majority investor in Gol and Colombia’s Avianca, have been in talks since last year to “explore options”, seeking to strengthen their businesses to face challenging times for the industry in the region.
They have now signed a non-binding memorandum of understanding to combine Azul and Gol, the first of several steps towards a deal, a securities filing showed.
It also marks the beginning of the process of obtaining regulatory approvals for the combination, including from the antitrust regulator CADE.
Latin American airlines are facing financial hurdles in the wake of the COVID-19 pandemic, with most forced to restructure, several into bankruptcy, while struggling with heavy debt.
Gol has been under Chapter 11 bankruptcy reorganization in the United States since early 2024, while Azul recently had to enter into agreements with lessors to cancel obligations in exchange for an equity stake, and with bondholders to obtain new financing.
The combination would follow Gol’s exit from bankruptcy proceedings.
Earlier in the day, Gol announced a new five-year strategic plan that lays the groundwork for a Chapter 11 exit, which is expected by May.
The combined company, Rodgerson said, will include three board members appointed by Azul, three appointed by Abra and three independent members. Azul would appoint the CEO of the company and Abra its president.
Analysts noted that the transaction could be complex as it requires regulatory approvals, but acknowledged that market turbulence, including the sharp depreciation of the Brazilian real in recent months, could have given the deal a boost.
Azul and Gol, which already operate in codeshare, would be betting on their complementary networks to win antitrust approval, noting that they have approximately 90% complementary routes that do not overlap.
Gol focuses on big cities like Sao Paulo, Rio de Janeiro and Brasilia, while Azul has a more extensive network.
Rodgerson said having different carrier fleets will put them in a better position to negotiate with lessors, manufacturers and suppliers.
