Azul Linhas Aéreas Successfully Concludes Settlement with OEMs and Lessors

Brazil’s Azul Linhas Aéreas Brasileiras has successfully completed the restructuring of its obligations with “substantially all” lessors and manufacturers. The airline’s strategic move involves settling part of its liabilities through the issuance of new senior unsecured notes and up to USD 570 million in new shares.

Azul’s Chief Financial Officer, Alex Malfitani, highlighted the significance of the agreements, stating, “Through these agreements, we have significantly improved our capital structure and cash flows by reducing our lease liabilities and payments, while at the same time honouring our commitment to fully compensate our partners.”

The restructuring initiative eliminates certain lease payments deferred during the pandemic permanently. Azul has also reached agreements to permanently reduce some leases to align with current market prices while deferring other payments. Additionally, conditions related to end-of-lease obligations have been amended, with some leases terminated earlier than initially contracted.

As part of the settlement, Azul has already issued USD 370 million in senior unsecured notes with a 7.5% interest rate and a maturity date in 2030 to specific lessors and manufacturers. The airline will further issue up to USD 570 million in new preferred shares, each valued at BRL 36 reais (USD 7.15). The issuance of new shares will occur in quarterly instalments starting in the third quarter of 2024 through the fourth quarter of 2027.

Azul has the flexibility to complement the shares with cash payments or issue additional stock if the stock price trades below the set price by the end of 2027. Conversely, if the stock price appreciates to an undisclosed level, the airline may issue fewer new shares.

The restructuring agreements are anticipated to result in a significant reduction in Azul’s lease payments, amounting to BRL 1.3 billion (USD 258 million) in 2023 and BRL 1 billion (USD 199 million) in 2024.

Azul’s decisive measures aim to fortify its financial position, enhance liquidity, and ensure sustained operational strength as it navigates the evolving aviation landscape. Stay tuned for further updates on Azul’s strategic initiatives and their impact on the airline’s trajectory in the Brazilian aviation market.