On January 15, Azul and Gol, two major Brazilian airlines, are inching closer to a significant merger that could establish a leading carrier in Latin America's largest economy, according to a securities filing. The potential union, after extensive discussions and market speculation, would result in a combined domestic market share of about 60%, surpassing Chile-based LATAM Airlines' local operations.
Azul's CEO, John Rodgerson, described the merged entity as "a national champion," emphasizing that despite shared ownership, both brands would continue to operate independently. He justified the move by citing other successful national carriers like LATAM in Chile, Lufthansa in Germany, and IAG in the UK, highlighting the importance of a robust airline for growth and the acquisition of domestic aircraft.
Rodgerson also mentioned improved connectivity and reduced capital costs as potential benefits. The partnership between Azul and Abra Group, Gol's majority investor and also invested in Colombia's Avianca, is aimed at enhancing their operations amid industry challenges in the region.
The nonbinding memorandum of understanding signed between Azul and Gol marks the initial step toward blending the two airlines, with regulatory approvals, including from antitrust regulator CADE, being a requirement. Latin American airlines have been grappling with financial difficulties since the onset of the COVID-19 pandemic, with some undergoing restructuring and bankruptcy proceedings due to high debt burdens.
Gol, which has been under Chapter 11 bankruptcy in the US since early 2024, and Azul have been navigating their financial situations through agreements and fresh financing. The proposed combination signals Gol's exit from bankruptcy. The merged company is set to have a board composition comprising representatives from Azul, Abra, and independent directors, with Azul appointing the CEO and Abra the chairman.
Analysts recognize the complexity of the deal due to regulatory procedures but suggest that recent market volatility may have propelled the agreement, aided by Brazil's currency devaluation. Azul and Gol, boasting complementary route networks, aim to leverage this synergy to secure antitrust approval. Gol's focus on key cities contrasts with Azul's broader network, offering a strength in negotiating with industry stakeholders.