Brazil’s Aviation Landscape Set to Shift with Proposed Merger
A New Era of Air Travel in Latin America
Two of Brazil’s largest airlines, Azul and Gol, are poised to create a dominant carrier in Latin America’s largest economy, according to a recent securities filing. The proposed merger would give the combined entity a significant market share of around 60%, surpassing the local unit of Chile-based LATAM Airlines.
A National Champion in the Making
Azul’s Chief Executive, John Rodgerson, envisions the merged carrier as a “national champion,” citing examples of dominant national carriers in other countries, such as LATAM in Chile, Lufthansa in Germany, and IAG in the UK. Rodgerson believes that a strong airline is essential for growth, particularly one that supports local aircraft manufacturers.
Benefits of the Merger
The combined carrier would operate under two separate brands, leveraging their complementary networks to secure antitrust approval. With approximately 90% non-overlapping routes, the merger would create a more extensive network, increasing connectivity and reducing costs. The different fleets of Azul and Gol would also strengthen their negotiating power with lessors, manufacturers, and suppliers.
Overcoming Challenges
The merger comes at a time when Latin American airlines are facing significant financial hurdles in the wake of the COVID-19 pandemic. Both Azul and Gol have had to restructure their operations, with Gol currently undergoing Chapter 11 bankruptcy reorganization in the United States. The combined entity would follow Gol’s exit from bankruptcy proceedings, expected to happen by May.
Regulatory Approvals Ahead
The proposed merger marks the beginning of the process to obtain regulatory approvals, including from antitrust regulator CADE. While analysts acknowledge the complexity of the transaction, they believe that market turbulence, including the recent depreciation of Brazil’s real, may have given the deal a boost.
Leadership Structure
The combined company would have a leadership structure comprising three board members appointed by Azul, three by Abra Group, and three independent members. Azul would name the chief executive, while Abra would appoint the chairman.
A New Chapter in Brazilian Aviation
The proposed merger between Azul and Gol signals a significant shift in Brazil’s aviation landscape, promising to create a dominant carrier that can drive growth and connectivity in Latin America’s largest economy. As the deal moves forward, regulators and industry stakeholders will be watching closely to see how this new entity takes shape.
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