Azul Linhas Aéreas, Brazil’s third-largest airline, has declared bankruptcy under Chapter 11 in a New York court on May 28, 2025. The company is facing a significant debt of $5. 56 billion and has joined other local airlines, GOL and LATAM, in seeking protection from US bankruptcy courts to restructure their finances.
According to The Rio Times, Azul has been in negotiations with creditors and investors for months, including commitments from United Airlines and American Airlines to inject $100 to $150 million each, once the airline successfully undergoes financial restructuring.
The airline’s debt has rapidly increased in recent months due to national currency fluctuations, rising US interest rates, and global supply chain delays. In the first quarter of 2025, Azul’s debt rose by 50. 3%, while its cash reserves dropped by 51%. The airline’s lease payments and debt servicing reached $1. 31 to $1. 38 billion annually.
In January 2025, Azul initiated the first phase of its restructuring plan, which eliminated $1. 6 billion of debt through equity swaps with aircraft lessors and bondholders. However, this was not enough to prevent the Chapter 11 filing. The bankruptcy filing will give the airline relief from its creditors as it continues to reorganize its finances and turn its fortunes around.
As part of the restructuring process, creditors have agreed to convert $784. 6 million of debt into preferred shares and extend $780 million in maturities to 2029 to 2030. Additionally, a capital infusion of $525 million aims to stabilize the airline’s operations. Post-restructuring, bondholders and lessors will hold a 45% stake in the company, while existing shareholders will see their stakes diluted.
The airline’s fleet issues have also contributed to its financial struggles. Azul has been forced to ground multiple aircraft with Pratt & Whitney engines, which require additional maintenance checks and lack spare parts. The airline has a fleet of 192 aircraft, including 59 Airbus A320s and 12 A330s. Currently, six of these aircraft are inactive, while 27 are listed as parked. The airline has also leased aircraft from other operators to cover its flight schedule, incurring high leasing costs and facing criticism from Brazilian labor unions. To modernize its fleet, the airline plans to integrate 15 fuel-efficient Embraer E195-E2 jets by late 2025.
With court approval, Azul expects minimal disruptions to its operations during the restructuring process, following a similar approach to GOL in 2024/25 and LATAM’s exit from bankruptcy in 2022. Merger talks with GOL have been paused to focus on financial restructuring.
Azul’s CEO, John Rodgerson, stated that the agreements with US airlines, leasing companies, and other creditors and bondholders mark a significant step forward in the transformation of the airline.