Brazilian Aviation Sector Set for Major Shake-Up
Government Backs Potential Merger Between Gol and Azul
Brazil’s ports and airports minister, Silvio Costa Filho, has given a crucial nod to a potential merger between Brazilian airlines Gol and Azul, citing the need to preserve the aviation sector and safeguard jobs. The merger, announced earlier this month, would create a dominant carrier in Latin America’s largest economy, holding around 60% of the domestic market.
A Boost to the Sector
Costa Filho believes the tie-up would strengthen Brazil’s aviation sector, allowing for lower credit costs and increased connectivity. The minister’s support is crucial, as the sector has struggled with high debt since the COVID-19 pandemic. Gol has been under Chapter 11 bankruptcy reorganization in the United States since early 2024, while Azul recently struck a deal with lessors to scrap obligations in exchange for an equity stake.
Competition Concerns
However, the merger has raised concerns about competition and airfare costs. LATAM Airlines, which currently holds a 40% market share, has expressed reservations about the deal. Jerome Cadier, LATAM’s Brazil head, has called for “serious mitigation measures” from antitrust regulator CADE. Gesner Oliveira, CADE’s former head, has warned that the merger would lead to less competition and higher prices.
Survival and Growth
Costa Filho argues that the merger would help both companies survive, preserve jobs, and increase capacity. He believes that a stronger airline industry would ultimately benefit consumers. Azul CEO John Rodgerson has clarified that the companies aim to profit through volume, not price, and that increasing supply and capacity would lead to lower fares.
Regulatory Hurdles
The merger still needs to clear regulatory hurdles, with CADE’s superintendent Alexandre Souza promising a thorough examination of competitive conditions. Costa Filho has met with Gol and Azul bosses to discuss potential price increases, and the minister is confident that the airlines will prioritize volume over price.
Presidential Support
Brazilian President Luiz Inacio Lula da Silva has been monitoring the discussions on the potential merger and supports the deal to ensure the country does not lose an airline company. According to a person familiar with the talks, the president wants to ensure Brazilians can afford plane tickets.
A New Era for Brazilian Aviation
If successful, the merger would create a new era for Brazilian aviation, with a combined firm operating two separate brands despite shared ownership. Analysts at JPMorgan believe the low network overlap between Azul and Gol would play in favor of the merger, despite their significant combined market share. As the sector navigates this potential shake-up, one thing is clear: the future of Brazilian aviation hangs in the balance.
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