Azul SA is actively engaging in discussions to merge with Gol Linhas Aereas Inteligentes SA, as negotiations with the latter's main shareholder progress. This development indicates a significant step forward in the potential consolidation of the two Brazilian carriers.
In a notable development, the Abra Group Ltd. is considering transferring its Gol shares to Azul, in return for a share in the merged entity. This arrangement is particularly attractive to Azul as it may not necessitate a substantial cash outlay. Abra Group intends to maintain its stake in Avianca Holdings SA, another major player in the Latin American aviation sector.
Following the news, shares of both airlines experienced a surge, with trading temporarily paused in Sao Paulo. Gol's shares soared by 8%, reaching 1.48 reais, whereas Azul saw a reversal in its fortunes, with its shares jumping by up to 2.2% to 10.70 reais.
Previously reported in March, Azul enlisted the services of Citigroup Inc. and Guggenheim Partners for advisory on the acquisition of Gol, which has been navigating through financial challenges exacerbated by high debt and fuel costs. The potential deal with Abra Group has seen increased momentum as talks between the involved parties intensify.
Azul and Gol, along with Santiago-based Latam Airlines Group SA, are the dominant forces in Brazil's aviation market, the largest in Latin America. While both airlines operate on major routes, Gol focuses on the Sao Paulo, Rio de Janeiro, and Brasilia sectors, whereas Azul boasts a broader network.
Both Azul and Abra have refrained from commenting on the ongoing discussions. Gol has yet to respond to inquiries for comments. Any potential merger would require approval from company stakeholders, creditors, and regulatory bodies. Despite the reduction in major local carriers, Azul remains optimistic about receiving the necessary approvals.
Gol sought Chapter 11 bankruptcy protection as it dealt with $2.7 billion in near-term liabilities, managing to increase its debtor-in-possession financing from $950 million to $1 billion. Meanwhile, Avianca, having filed for Chapter 11 in 2021, is faring relatively well, with its bonds yielding a 26% return over the past year, outperforming the average for Latin American corporates.
