Azul Linhas Aéreas, one of Brazil’s leading airlines, has recently filed for Chapter 11 proceedings in the United States, opting for a process equivalent to judicial reorganization rather than pursuing a similar procedure in Brazil. This decision marks a significant moment in the company’s history and reflects broader trends in the Latin American aviation sector, where several major carriers have sought court-supervised reorganization in the wake of the COVID-19 pandemic, and ongoing financial pressures.
Azul’s move to seek protection under Chapter 11 of the U.S. Bankruptcy Code comes after months of financial strain, primarily driven by the lingering effects of the pandemics, high fuel costs, currency devaluation, and persistent supply chain disruptions. According to CEO John Rodgerson, the company’s debt burden became unsustainable, and now, it can clear it all. Despite previous out-of-court reorganization attempts, Azul continued to face mounting pressure from creditors and operational challenges, such as route suspensions and flight cancellations.
By filing for Chapter 11 in the U.S., Azul gains access to a legal framework that allows the company to maintain control of its assets, continue normal operations, and negotiate with creditors under court supervision. This process is similar to Brazil’s judicial reorganization but will be easier to renegotiate debt in U.S. dollar, secure new financing and the possibility of a more simplified negotiation with international stakeholders.
During the first court hearing in New York, Azul presented its reorganization plan, which includes a 35% reduction in the future fleet to optimize operations and cut costs. The plan also involves terminating certain aircraft leasing contracts and incorporating newer, more efficient models. The company has secured approximately US$1.6 billion in financing, and Azul expects to eliminate over US$2 billion in debt, and receive up to US$950 million in additional capital infusions.
Throughout the restructuring, Azul has emphasized its commitment to maintaining regular operations, honoring customer reservations, and continuing to serve its network. The company’s main hub at Viracopos Airport (in the city of Campinas, state of São Paulo) remains operational, although some routes have been suspended due to cost considerations. Despite these adjustments, Azul continues to expand its international offerings, recently launching new direct flights from Campinas to Montevideo, Madrid, and Porto.
Azul’s decision to file for Chapter 11 in the U.S. aligns with a broader pattern among Latin American airlines. In recent years, carriers such as Avianca, LATAM, and Gol have all sought court-supervised reorganization in the U.S. to address high debt levels and operational disruptions caused by the pandemics. This trend underscores the advantages of the U.S. bankruptcy system for companies with significant international operations and creditor bases.
Azul’s management is optimistic about a swift resolution, aiming to complete the reorganization and exit Chapter 11 before the end of the year. The company believes that the process will leave it financially stronger, more competitive, and better positioned to navigate the challenges of the global aviation market.
In summary, Azul Linhas Aéreas’ choice to pursue Chapter 11 protection in the United States represents a strategic effort to restructure its finances, secure new capital, and ensure long-term stability while continuing to serve its customers and partners. The move highlights the growing importance of cross-border legal frameworks in the aviation industry and sets a precedent for other companies facing similar challenges in the region.