Azul SA (B3: AZUL4; NYSE: AZUL) has announced Restructuring Agreements with its key stakeholders, including the company’s bondholders, its largest lessor, AerCap — which represents the majority of the company’s leasing obligations — and strategic partners United Airlines and American Airlines, with the aim of proactively implementing a financial reorganization process. The Agreements aim to transform Azul’s capital structure through significant debt reduction and positive cash generation. To implement them, Azul has initiated a voluntary restructuring process in the United States, under Chapter 11, which includes approximately US$1,6 billion in financing during the process, elimination of more than US$2,0 billion in debt and provision for up to US$950 million in new capital contributions upon exit from the process.
Capital structure transformation with stakeholder
Azul’s process begins with the formal of a large number of strategic stakeholders. The company has secured approximately US$1,6 billion in DIP financing from financial partners, which will be used to refinance certain existing debt and provide approximately US$670 million in new liquidity during the process. At the end of the process, the DIP is expected to be repaid with proceeds from a share subscription offering of up to US$650 million, with firm guarantees from the aforementioned investors, in addition to a possible additional investment of up to US$300 million by United Airlines and American Airlines, subject to certain conditions. This comprehensive financing package enables a structured and accelerated exit from the process.
Customers and employees
The company announced that operations and sales will continue as normal, with all tickets, loyalty points and benefits maintained for its customers. It will continue to operate normally and pay crew as usual, maintaining benefits, including health insurance and paid time off.
There will be no changes to the reservation systems for travel agents and cargo operations.
Azul plans to cut 35% of its fleet and reduce leverage
Among the main points, the airline highlighted a cut of more than 35% in the future fleet. The objective is to “improve resilience and reduce overall risk, foreign exchange exposure and leverage”, according to a presentation to investors, sent to the Brazilian Securities and Exchange Commission (CVM).
With the restructuring, Azul estimates to reduce aircraft lease obligations by US$744 million by 2029, with annual leasing expenses falling from US$842 million to US$646 million by 2025. Total leasing liabilities are expected to fall from US$3,361 billion to US$2,937 billion by February 2026.
Installation of Special Independent Committee
The company informed its shareholders and the market in general that the Company's Board of Directors (“Board of Directors”), in a meeting held on this date, approved the creation of a Special Independent Committee (“Committee”).
The Committee is composed of three , Ms. Renata Faber Rocha Ribeiro, Mr. Jonathan Seth Zinman and Mr. James Jason Grant, all independent directors of the Company. The Committee will act as an advisory body to the Board of Directors, with powers and competence to evaluate, review, plan, supervise negotiations and provide recommendations to the Board of Directors on any matters arising from or related to the Chapter 11 proceedings initiated by the Company, as detailed in the Material Fact released by the Company on this date.
United Airlines, American Airlines and AerCap
“United began its partnership with Azul in 2014 and invested in the company in 2015. Since then, we have connected hundreds of thousands of engers and are excited to continue to expand this business. Azul is more than a business partner — its customer-centric approach and unique network connecting communities large and small have significantly improved the enger experience in Brazil. That’s why we the restructuring and new agreement to build an even stronger partnership,” said Andrew Nocella, Executive Vice President and Chief Commercial Officer, United Airlines.
Stephen Johnson, Vice Chairman and Chief Strategy Officer of American Airlines, added: “We are confident that Azul’s plan will bring significant benefits to the Brazilian aviation market and to travelers to, from and within the country. American has operated in Latin America since 1942 and currently flies to 14 destinations in South America. Our network, combined with partners GOL and JetSMART and the strength of Azul’s network, will offer our customers even greater connectivity throughout the Americas. We are excited to this process and be part of Azul’s future.”
AerCap CEO Aengus Kelly said: “AerCap has entered into a agreement with its long-standing partner Azul. We are confident that Azul will emerge even stronger from this process. Together, AerCap and Azul are the largest operators of Embraer E2 commercial aircraft, strengthening the Brazilian aviation industry like no other.”
