Brazil-based low-cost carrier Azul has filed for Chapter 11
protection, the airline announced Wednesday. The move comes two weeks after
Azul issued a statement in response to press reports that it was exploring a
U.S. bankruptcy filing, saying at that time it had "made significant
progress in reducing its debt and leverage."
Azul has entered into agreements with key financial
stakeholders, partners American Airlines and United Airlines, and its largest
lessor, AerCap, to restructure the carrier. The plan includes a commitment of
approximately $1.6 billion in financing throughout the process, elimination of
more than $2 billion of debt and "contemplate[d] further equity
financing" of up to $950 million upon emergence—with up to $300 million of
that last figure coming from American and United, "subject to the
satisfaction of certain conditions," according to Azul.
The airline plans to "continue flying and operating as
normal while maintaining its commitments throughout this process."
"United was proud to begin cooperating with Azul in
2014 and to invest
in Azul in 2015," United chief commercial officer Andrew Nocella said
in a statement. "We support Azul's restructuring process and have entered
into an agreement to build an even stronger relationship in the future."
"We are confident that Azul's plan to strengthen its
future will be extremely positive for the Brazilian aviation market and
travelers to, from and across Brazil," American vice chair and chief
strategy officer Stephen Johnson said in a statement. "Our service,
including that of our partners Gol and JetSmart, combined with the strength and
breadth of Azul's network, will provide our customers another unique option for
traveling between the Americas and even more connectivity in Brazil and throughout
South America. We are excited to support this process and to be part of Azul's
future."
American has been partners with competing Brazil-based
carrier Gol,
which also is in Chapter 11 and received approval on May 20 for its
restructuring plan with an expected emergence in early June. In addition, Abra,
Gol's parent company, announced plans to combine Gol and Azul operations in
Brazil.
"Gol remains a key partner to American," Johnson added.
"We are excited about the future of our partnership."