Brazil’s Azul Airlines Files for Chapter 11 Bankruptcy

Brazil’s Azul Airlines Seeks Chapter 11 Bankruptcy Protection

Azul Linhas Aéreas Brasileiras, Brazil’s third-largest airline, has filed for Chapter 11 bankruptcy protection in the United States as part of a strategic effort to restructure its substantial debt load, which currently stands at $5.56 billion. This decision follows several months of private, out-of-court negotiations that enabled the airline to reduce nearly $1.6 billion in debt and raise $525 million in new capital. Despite these initial measures, Azul concluded that a formal bankruptcy process was necessary to address the remaining financial challenges, many of which are rooted in the economic fallout from the COVID-19 pandemic.

Restructuring Strategy and Financial Support

Through the Chapter 11 proceedings, Azul aims to eliminate over $2 billion in funded debt. The airline has secured commitments for approximately $1.6 billion in debtor-in-possession financing from its partners. Of this amount, $670 million will be injected as new capital to maintain liquidity during the restructuring, while the remainder will be allocated to repay existing obligations. Azul anticipates emerging from bankruptcy protection by the end of 2025.

Chief Executive John Rodgerson highlighted the unsustainable nature of the airline’s pandemic-era debt, stating, “We now have an opportunity to clean it all up.” He emphasized that the restructuring is not solely a financial reorganization but also a foundational step toward building a “robust, resilient, industry-leading airline.”

The airline has garnered significant backing from key industry players. American Airlines and United Airlines have pledged a potential shared equity investment of up to $300 million. Additionally, Azul has secured a support agreement from AerCap, its largest aircraft lessor.

Operational Profile and Oversight

At the time of filing, Azul operated a fleet of 226 aircraft and employed over 16,000 staff members. The airline runs approximately 900 daily flights to 137 destinations spanning Brazil, the United States, Europe, and South America. According to ch-aviation data, Azul’s fleet includes 193 leased aircraft, featuring models such as the A320neo, A321neo, A330, ATR72-600, and Embraer E195, with further orders pending. Its regional subsidiary, Azul Conecta, operates 24 Cessna Grand Caravans. AerCap leases 69 aircraft to Azul, while other major lessors include Aircastle, Avolon, BOC Aviation, and SMBC Aviation Capital.

Among Azul’s largest unsecured creditors are UMB Bank, with claims totaling $354.8 million; Brazil’s air force, owed $189.8 million; and General Electric Service Distribucion, with claims of $141.7 million.

To guide the restructuring process, Azul has established a special independent committee composed of directors Renata Faber Rocha Ribeiro, Jonathan Seth Zinman, and James Jason Grant. This committee will advise the board, oversee negotiations, and provide recommendations throughout the bankruptcy proceedings.

Azul has committed to maintaining normal operations during the restructuring to reassure customers and business partners. The bankruptcy filing is expected to prompt competitors to reevaluate their strategies as Brazil’s aviation sector continues to adapt to a rapidly evolving market environment.