Azul Airlines Negotiates Debt Settlement, Rules Out Chapter 11
Azul Linhas Aéreas Brasileiras (AD) has confirmed it is not considering filing for Chapter 11 bankruptcy protection in the United States. Instead, the Brazilian airline is negotiating with lessors to settle USD 600 million in debt over the next three years through a combination of shares, debt, and cash, according to CEO John Rodgerson in an interview with Folha de S.Paulo, reported ch-aviation.com.
“Since the Covid-19 pandemic, we’ve been working with our creditors to restructure contracts, and we’ve agreed with lessors that we will settle the debt within the next three years,” Rodgerson explained. “This debt starts maturing next year, and we have the option of paying with stock, taking on more debt, or paying in cash.”
The negotiations, which are ongoing, are expected to be finalized within the next 30 days. Rodgerson indicated that both sides are likely to agree on a fixed payment plan, with around 20% of the company’s equity being part of the deal. Azul is also focusing on optimizing its equity structure to improve profitability and liquidity. Last week, the airline confirmed that it is developing a new financial strategy aimed at boosting its operational performance.
Despite recent reports from Bloomberg suggesting the possibility of filing for Chapter 11 bankruptcy, Rodgerson firmly denied those claims. “Chapter 11 is a very damaging procedure for lessors and our partners, so it’s not on the table for us,” he said. The airline is prioritizing negotiations to avoid such drastic measures, focusing on finding a solution that works for both the company and its creditors.
Should Azul be unable to reach an agreement with its lessors, the airline is considering alternative options, such as extending the debt repayment period to 10 years instead of the current three-year plan. This potential out-of-court negotiation could provide more flexibility for Azul to manage its financial obligations while maintaining relationships with its lessors.
In addition to restructuring debt, Azul is exploring other ways to strengthen its capital base. One such option involves recent changes to the National Civil Aviation Fund (Fundo Nacional de Aviação Civil – FNAC) law. These modifications allow airlines in Brazil to access up to BRL 5 billion (USD 886 million) in credit, which could provide Azul with additional financial support.
Azul, like many airlines, was significantly impacted by the Covid-19 pandemic, which disrupted global travel and severely affected the aviation industry. However, the airline is taking proactive steps to ensure its long-term stability and growth. By focusing on negotiations with lessors and exploring new financing options, Azul aims to maintain profitability and improve liquidity without resorting to bankruptcy protection.
As Azul moves forward with its financial restructuring plan, the company remains optimistic about its future. The airline is confident that it can reach an agreement with lessors and continue to enhance its operations while navigating the challenges of the post-pandemic aviation market. The outcome of these negotiations will play a crucial role in determining the airline’s path forward, but Rodgerson is confident that Azul will emerge from this period stronger and more resilient.
Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com, Azul Linhas Aéreas Brasileiras