Azul and Abra sign non-binding MoU with intent to combine their businesses in Brazil

Rhea-AI Summary

Azul and Abra (majority investor of Gol and Avianca) have signed a non-binding Memorandum of Understanding (MoU) to combine their businesses in Brazil. The intended merger between Azul and Gol aims to strengthen Brazil's aviation sector globally, with the companies having approximately 90% complementary and non-overlapping routes.

While maintaining separate operating certificates and brands, the combination seeks to expand destinations, routes, connectivity, and services. The merger would serve more than 200 cities in Brazil, potentially increasing domestic and international flight offerings. The agreement includes governance and capital structure arrangements, with net leverage of the combined entity expected to be comparable to Gol's leverage post-reorganization.

The transaction's completion depends on various factors, including economic terms agreement, due diligence, definitive agreements, regulatory approvals, and the consummation of Gol's Chapter 11 reorganization plan.

Positive

• Potential expansion to over 200 cities served in Brazil
• 90% route complementarity between airlines reduces operational redundancy
• Enhanced market competitiveness in global aviation sector
• Increased network connectivity and flight options for customers

Negative

• Transaction contingent on multiple complex approvals and conditions
• Dependent on Gol's successful Chapter 11 reorganization
• Regulatory scrutiny may delay or prevent merger completion
• Current agreement is non-binding and preliminary

News Market Reaction

+8.80%

1 alert

+8.80% News Effect

On the day this news was published, AZUL gained 8.80%, reflecting a notable positive market reaction.

Data tracked by StockTitan Argus on the day of publication.

Customers of Azul and Gol, will have access to more destinations, routes, products and services. The companies have almost 90% complementary routes, will maintain their independent operating certificates and brands

SÃO PAULO, Jan. 15, 2025 /PRNewswire/ -- Azul and Abra, the majority investor of Gol and Avianca, have announced today they have signed a non-binding Memorandum of Understanding (MoU) with the intent to combine their businesses in Brazil. The intended structure, the result of a combination of Azul and Gol, will position Brazil at an increased level of global strength in a highly globalized sector. The purpose of the business combination is to promote growth in the Brazilian aviation industry, through more destinations, routes, connectivity and services to consumers, with an increase in the supply of domestic and international flights. The two companies have approximately 90% complementary and non-overlapping routes. Although the MoU provides for the unification of strategy, the airlines are expected to keep their operating certificates, and therefore their brands and operations, separate.

The MoU, which includes governance and capital structure agreements, formalizes Azul and Abra's intention to move forward with the next steps in a combination of their businesses and marks the beginning of the process for regulatory approvals. The intention to materialize synergies between the airline networks and the use of the Azul and Gol´s fleets result in benefits for the consumer, such as more options and products; and for Brazil, with the increase of new destinations served by Brazilian aviation.

"Azul was created with the aim of expanding the Brazilian airline market, seeking to increase Brazilians' access to air travel, regardless of where they are in the country, through expanded connectivity. This combination of forces would provide the opportunity to strengthen the sector, increasing the number of flights on offer, reaching more than 200 cities served in Brazil and the ability to compete in a highly globalized sector," says Azul's CEO, John Rodgerson. "Increased connectivity and job creation are some of the many positive results expected from this agreement, while also delivering high quality service and the search for the best value for money for the consumer," he adds.

The proposed combination represents a major development for the national aviation industry and all the economic activity facilitated by a mode of transport of such importance for a continental country. With more than 220 million inhabitants and around 110 million air journeys a year, the Brazilian market is less developed than that of several neighboring countries and has enormous potential for expansion. The MoU announced today seeks to develop the industry in an accelerated manner.

The parties have agreed to a business principle that any combination will result in net leverage of the combined entity that will be at least comparable to the net leverage of Gol at the time of the Transaction and after consummation of its plan of reorganization.

The closing of the transaction is subject to Abra and Azul agreeing on economic terms of the transaction, the satisfactory completion of due diligence, entering into definitive agreements, obtaining corporate and regulatory approvals (including from the Brazilian antitrust authorities), satisfaction of customary closing conditions the consummation of Gol's Chapter 11 plan of reorganization and receipt by Abra of consideration thereunder.

About Azul
Azul S.A. (B3: AZUL4, NYSE: AZUL) is Brazil's largest airline in number of flights and destinations served, with over 1000 flights per day to more than 160 cities. With an operational fleet of more than 160 aircraft and more than 14,000 crew members, Azul flies more than 300 direct regional, domestic and international routes. In 2022, Azul was named the most on-time airline in the world, according to the OnTime Performance-OTP Review report by Cirium - the world's leading reference for operational data in the aviation industry. In addition, in 2020, Azul was elected the best airline in the world by TripAdvisor Travelers' Choice, being the only Brazilian carrier to be awarded with both prestigious industry recognitions.

For more information, visit www.voeazul.com.br/imprensa. 

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SOURCE Azul S.A.

FAQ

What are the main benefits of the Azul-Abra merger for Brazilian aviation?

The merger aims to expand destinations, increase flight offerings, enhance connectivity across Brazil, and strengthen the country's position in global aviation, serving over 200 cities with complementary routes.

Will Azul and Gol maintain separate brands after the merger?

Yes, according to the MoU, both airlines will maintain their separate operating certificates, brands, and operations while unifying their business strategy.

What conditions need to be met for the Azul-Abra merger to complete?

The merger requires economic terms agreement, due diligence completion, definitive agreements, regulatory approvals, and the successful completion of Gol's Chapter 11 reorganization plan.

How much route overlap exists between Azul and Gol operations?

The airlines have approximately 90% complementary and non-overlapping routes, meaning only about 10% of their routes overlap.

What impact will the Azul merger have on Brazilian air travel accessibility?

The merger aims to increase air travel accessibility by expanding connectivity, adding more destinations, and increasing flight options for Brazilian consumers.