Azul transforms for the future as Company reaches agreements on financial reorganization with key stakeholders, including its lenders, largest lessor, and strategic partners United Airlines and American Airlines

Rhea-AI Summary

Azul (NYSE: AZUL), Brazil's largest airline by flight departures and destinations, has initiated a pre-arranged Chapter 11 restructuring process with key stakeholders. The reorganization includes US$1.6 billion in debtor-in-possession financing and agreements with bondholders, AerCap (its largest lessor), United Airlines, and American Airlines. The plan will eliminate over US$2.0 billion in debt and secure up to US$950 million in equity investments upon emergence. The restructuring package comprises US$670 million in new capital, a US$650 million Equity Rights Offering, and up to US$300 million in equity investments from United and American Airlines. Azul will continue normal operations, honoring all tickets, loyalty points, and customer benefits while implementing these financial changes.

Positive

• Secured US$1.6 billion in debtor-in-possession financing
• Elimination of over US$2.0 billion in total funded debt
• Up to US$950 million in new equity investments upon emergence
• Strategic support from major airlines United and American Airlines
• Pre-arranged agreements with key stakeholders already in place
• Continued normal operations during restructuring

Negative

• Company forced to file for Chapter 11 bankruptcy protection
• Significant debt burden from COVID-19 pandemic and macroeconomic headwinds
• Need to reduce lease obligations and optimize fleet
• Requires substantial financial restructuring to remain viable

Insights

Restructuring & Bankruptcy Specialist

Azul enters pre-arranged Chapter 11 with major stakeholder agreements already in place, eliminating $2B debt while continuing operations.

Azul's restructuring filing represents a highly structured pre-arranged Chapter 11 process with several advantages over typical airline bankruptcy cases. The company has already secured agreements with bondholders, its largest lessor (AerCap), and strategic partners (United and American Airlines) before filing, which significantly streamlines the process and improves certainty of outcome.

The financial restructuring includes $1.6 billion in debtor-in-possession financing, elimination of over $2 billion in debt, and contemplates up to $950 million in exit equity financing. This comprehensive package provides Azul with approximately $670 million in new liquidity during the restructuring process.

Critical to this restructuring is the post-emergence capital structure, which includes an equity rights offering of up to $650 million backstopped by financial partners, plus potential additional equity investments of up to $300 million from United and American Airlines. This pre-arranged exit financing is unusual and significantly de-risks the bankruptcy process.

From an operational perspective, the filing includes first-day motions to maintain business continuity, ensuring customer tickets and loyalty program benefits remain intact. The company is using the U.S. Chapter 11 process (rather than Brazilian insolvency proceedings) which provides more flexibility for operational continuation while restructuring financial obligations.

The company cites COVID-19 pandemic effects, macroeconomic headwinds, and aviation supply chain issues as drivers of its financial distress. This restructuring allows Azul to address overleveraged debt while continuing to operate as Brazil's largest airline by departures and destinations.

Having its largest lessor, AerCap, already onboard is particularly significant as aircraft lease rejections and negotiations typically represent major hurdles in airline bankruptcies. The strategic partnership with United and American suggests potential deeper commercial relationships post-emergence, likely including expanded codeshare or network arrangements.

Airline Industry Analyst

Azul's pre-arranged bankruptcy presents operational continuity with strategic backing from United/American, strengthening competitive position despite restructuring.

Azul's pre-packaged bankruptcy represents a strategic repositioning rather than a distressed liquidation scenario. The company maintains its position as Brazil's largest airline by flight departures and destinations, with operations continuing normally throughout the process. This distinguishes Azul's filing from more desperate airline bankruptcies where service disruptions occur.

The involvement of United Airlines and American Airlines as equity investors post-emergence signals extraordinary industry confidence in Azul's business model and network strategy. This dual-airline investment is unusual and indicates Azul's strategic value in the Brazilian market, which remains South America's largest aviation marketplace.

Fleet optimization represents a critical component of this restructuring. Azul's partnership with AerCap, which describes them collectively as "the largest owners of Embraer E2 commercial aircraft," suggests the restructuring will preserve Azul's unique fleet strategy focused on Brazilian-manufactured E2 jets that serve smaller markets profitably.

The restructuring addresses the fundamental challenge facing Azul: operating a premium service model with high fixed costs in a market with currency volatility and macroeconomic challenges. By eliminating over $2 billion in debt, Azul can emerge with significantly reduced interest burdens and lease obligations.

From a competitive standpoint, this restructuring could strengthen Azul's position against LATAM and GOL, potentially enabling more aggressive network expansion post-emergence. The commercial support from both United and American suggests potential changes to alliance structures in Brazil, where currently GOL partners with American while LATAM has relationships with Delta. Azul could emerge with stronger U.S. connectivity through dual partnerships.

This bankruptcy represents an increasingly common approach for airlines globally: using Chapter 11 as a strategic tool to address pandemic-era debt rather than as a last resort for failing operations. Azul maintains its customer proposition while addressing balance sheet challenges, potentially emerging stronger in Brazil's competitive aviation landscape.

Company initiates pre-arranged restructuring process in the United States to effectuate agreements including approximately US$1.6 billion in debtor-in-possession financing.

Agreements to secure exit financing structure, including up to US$950 million in equity investments, enabling an accelerated path to emergence, a significant step in positioning Azul as a long-term industry leader in the region.

Operations and sales continue as usual, honoring all tickets, loyalty points, and Customer benefits, safely connecting Brazil with Azul's industry-leading Customer service.

SÃO PAULO, May 28, 2025 /PRNewswire/ -- AZUL S.A. (B3: AZUL4; NYSE: AZUL) ("Azul" or "Company"), the largest airline in Brazil by number of flight departures and destinations, today announced it has entered into Restructuring Support Agreements (the "Agreements") with its key financial stakeholders, including its existing bondholders; largest lessor, AerCap, representing the majority of the Company's aircraft lease liability; and strategic partners, United Airlines and American Airlines, to effectuate a proactive reorganization process. The Agreements are designed to transform the Company's financial future and position the business for the long term with significant deleveraging and positive cash flow generation. To implement the Agreements, which include a commitment of approximately US$1.6 billion in financing throughout the process, elimination of over US$2.0 billion of debt and contemplate further equity financing of up to US$950 million upon emergence, Azul is using the Chapter 11 process in the United States.

Customers, Crewmembers, and partners remain Azul's priority. Azul will continue flying and operating as normal while maintaining its commitments throughout this process.

"Azul continues to fly – today, tomorrow, and into the future. These Agreements mark a significant step forward in the transformation of our business – one that enables us to emerge as an industry leader in the main aspects of our business," said John Rodgerson, Chief Executive Officer of Azul. "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. Our strategy is not just about financial reorganization. By using this process, we believe that we are creating a robust, resilient, industry-leading airline – one that Customers will continue to love flying, at which Crewmembers will continue to love working, and that will create value for our stakeholders."

Chapter 11 is a Court-supervised financial reorganization process in the United States through which companies can restructure their balance sheet while continuing operations in the ordinary course of business. Azul intends to use this proven, well-known legal framework to eliminate over US$2.0 billion in total funded debt, reduce lease obligations, and optimize its fleet, allowing the Company to emerge with greater flexibility and a more sustainable business and capital structure.

"AerCap has signed a support agreement with its longstanding partner Azul. As the airline moves through its restructuring process, we are very confident Azul will emerge stronger than ever," said Aengus Kelly, Chief Executive Officer of AerCap. "Together with Azul, we are the largest owners of Embraer E2 commercial aircraft, supporting the Brazilian aviation industry like no other."

Azul's process is unlike any other airline restructuring case in the region, given the fact that it enters the process with agreements with many of its main stakeholders already in place. Azul has secured a commitment for debtor-in-possession ("DIP") financing of approximately US$1.6 billion from certain key financial partners, which will repay part of the Company's existing debt and provide the Company with approximately US$670 million of new capital to bolster liquidity during the restructuring process. Upon emergence, the Agreements provide for the DIP financing to be repaid with the proceeds of an Equity Rights Offering of up to US$650 million, backstopped by some of these financial partners and further supported by a contemplated additional equity investment of up to US$300 million from United Airlines and American Airlines, subject to the satisfaction of certain conditions. This comprehensive financing package means that Azul's path to emergence is clear, which streamlines the process and accelerates the timeline.

"United was proud to begin cooperating with Azul in 2014 and to invest in Azul in 2015. Since that time, we have connected hundreds of thousands of passengers and are excited about the opportunity to grow this business even more. Azul is more than just a commercial partner for United – their customer-first approach and unique route network connecting small and large communities have improved the passenger experience in Brazil. That's why we support Azul's restructuring process and have entered into an agreement to build an even stronger relationship in the future," said Andrew Nocella, Executive Vice President and Chief Commercial Officer of United Airlines.

Stephen Johnson, Vice Chair and Chief Strategy Officer for American Airlines added, "We are confident that Azul's plan to strengthen its future will be extremely positive for the Brazilian aviation market and travelers to, from and across Brazil. American has served Latin America since 1942 and is proud to fly to 14 destinations in South America. 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. We are excited to support this process and to be part of Azul's future."

Azul has filed customary motions with the Court to support ordinary-course operations including, but not limited to, continuing Crewmember compensation and benefits programs, honoring all Customer commitments including tickets for future travel and benefits under the Azul Fidelidade loyalty program, and fulfilling go-forward obligations to select vendors who are truly critical to the Company. These motions are typical in the Chapter 11 process.

John Rodgerson concluded, "We are grateful for the support of our bondholders, particularly those who are providing Azul with new capital, and our key strategic partners, American Airlines, United Airlines, and AerCap. Their support will allow us to optimize our fleet, reinforce our financial position, and operate more efficiently. We are confident that we will emerge even stronger and better positioned to continue connecting Brazil like no other, while offering the best service and value to our Customers."

Additional Information

Stakeholders seeking specific information about Azul's Chapter 11 case can visit its dedicated website at www.azulmaisforte.com.br. For case and claims information, please visit https://cases.stretto.com/Azul or call (833) 888-8055 (toll-free) or (949) 556-3896 (international).

The Company is supported by Davis Polk & Wardwell LLP, White & Case LLP, and Pinheiro Neto Advogados as legal counsel; FTI Consulting as financial advisor; Guggenheim Securities, LLC as investment banker; SkyWorks Capital LLC as fleet advisor; and FTI Consulting, C Street Advisory Group, and MassMedia as strategic communications advisors. The Participating Lenders are supported by Cleary Gottlieb Steen & Hamilton LLP and Mattos Filho as legal counsel and PJT Partners as investment banker. United Airlines is supported by Hughes Hubbard & Reed LLP and Sidley Austin LLP as legal counsel and Barclays Investment Bank as investment banker. American Airlines is supported by Latham & Watkins LLP as legal counsel. AerCap is supported by Pillsbury Winthrop Shaw Pittman LLP as legal counsel.

About Azul

Azul S.A. (B3: AZUL4, NYSE: AZUL), the largest airline in Brazil by number of flight departures and cities served, offers 900 daily flights to over 150 destinations. With an operating fleet of over 200 aircrafts and more than 15,000 Crewmembers, the Company has a network of 300 non-stop routes. Azul was named by Cirium (leading aviation data analysis company) as the most on-time airline in the world in 2023. In 2020 Azul was awarded best airline in the world by TripAdvisor, the first time a Brazilian flag carrier earned the number one ranking in the Traveler's Choice Awards. For more information, access www.voeazul.com.br/imprensa.

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SOURCE Azul S.A.

FAQ

What is Azul's Chapter 11 restructuring plan in 2025?

Azul's restructuring plan includes US$1.6 billion in DIP financing, elimination of US$2.0 billion in debt, and up to US$950 million in equity investments upon emergence, with support from United Airlines, American Airlines, and AerCap.

Will Azul continue operating during its Chapter 11 restructuring?

Yes, Azul will continue normal operations, honoring all tickets, loyalty points, and customer benefits throughout the restructuring process.

How much debt will Azul eliminate through its Chapter 11 restructuring?

Azul plans to eliminate over US$2.0 billion in total funded debt through its Chapter 11 restructuring process.

What is the equity investment planned for Azul's restructuring?

The equity investment includes a US$650 million Equity Rights Offering and up to US$300 million from United Airlines and American Airlines, totaling US$950 million.

How will Azul's restructuring affect its loyalty program members?

Azul's restructuring will not affect loyalty program members, as the company will continue honoring all Azul Fidelidade loyalty program benefits.