Azul on way to scoring a Go(a)l

Brazilian budget carrier, Azul Linhas Aéreas (Azul), intends to take over rival, Gol Linhas Aéreas Inteligentes, following Gol’s Chapter 11 bankruptcy filing in the U.S. The move is heralded by an initiative from Azul to secure funding for a proposal to Gol stakeholders. Global investment bank, Citigroup, and advisory and investment firm, Guggenheim Partners, were commissioned to draft a proposal for financing the deal.

According to Brazilian circles familiar with the matter, the merger project is currently still being explored. Neither airline has yet entered into talks on the takeover plans considered by the Azul management. This is likely to change when the two banks present a financing plan that does not overburden Azul and appears lucrative enough to Gol’s shareholders to enter into official negotiations.

Should the takeover take place, the combined airline Azul/Gol will have a major say in both the Latin American passenger and cargo markets  –  courtesy: Azul

Remarkable ascent
Incepted in 2008 by JetBlue founder, David Neeleman, his and Azul investors’ mutual aim was to create a large domestic low-cost airline in Brazil. Equipped with a fleet of Embraer aircraft and A320/A321s, Azul has meanwhile become the third largest South American airline after LATAM and Gol, but ahead of the Colombian Avianca.
A comparison of the route networks of Azul and Gol shows that the overlaps are limited. Azul operates roughly 70% of its routes independently. This fact could play a role for Brazil’s Administrative Council for Economic Defense (CADE), in case the regulator must ultimately decide for or against the takeover. According to latest data published by the National Civil Aviation Authority (ANAC), the domestic Brazilian aviation market is led by LATAM (36.7%), followed by Gol (34.1%) and Azul (28.7%).

Without a solid financing concept, no takeover
It remains to be seen if Azul can finance the takeover, given that the budget carrier went through a debt renegotiation process only recently. Azul told Bloomberg Businessweek that it is always attentive to the strategic dynamics of the airline industry and possible partnership opportunities. It also said that it has not negotiated or approved any specific transactions to date. Gol, Citi, and Abra, the holding company that controls Gol, declined to comment.

Cargo is an important contributor to Azul’s sales
Although primarily known as a budget carrier, Azul has also made a name for itself in air freight circles. The division is branded Azul Cargo Express and headed by Izabel Reis, one of the rare female leaders in the Latin American cargo industry. The product offering ranges from premium to e-com and standard freight.
In addition to the lower deck compartments of its more than 212 passenger aircraft, Azul Cargo operates two leased B737-400SF with a capacity of 20 tons each. Today, Azul Cargo Express offers door-to-door service at 153 domestic destinations and operates international routes to Miami, Ft. Lauderdale, Lisbon, Paris, Montevideo, Uruguay, and Bariloche in Argentina.



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