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💥New Chapter 11 Bankruptcy Filing - Azul S.A.💥
On May 28, 2025, Brazil-based Azul S.A. ($AZUL) and nineteen affiliates (collectively, the “debtors”) filed chapter 11 bankruptcy cases in the Southern District of New York (Judge Lane). Founded in ‘08, by American-Brazilian-Cypriot and certified aviation fanatic David Neeleman,* the debtors are “… largest airline in Brazil in terms of departures and cities served, operating approximately 900 daily departures to 137 destinations and maintaining a network of 273 non-stop routes in Brazil.” Which is a measure that lets the debtors puff up their chests while avoiding admitting LATAM ($LTM) dunks on them by revenue (LTM’s $13b in ‘24 vs. AZUL’s $3.5b) and, you know, every financial metric that matters. But, nevertheless, the debtors are a big operation, having a fleet of 226 aircraft and over 16k employees.
Here’s Chief Institutional and Corporate Officer Fabio Barros to tell you why the debtors hauled themselves up from São Paulo:
“Following grueling negotiations and tremendous efforts from the Debtors and their key stakeholders, the Debtors commenced the Chapter 11 Cases to implement a comprehensive financial restructuring that, once effectuated, will (a) reduce funded debt by over $2.0 billion, (b) provide the Company with approximately $670 million of new capital to bolster liquidity during the restructuring process, and (c) provide up to approximately $950 million of new equity investments upon emergence to address the debtor in possession (‘DIP’) financing raised in the Chapter 11 Cases and to optimize the size and cost structure of Azul’s fleet and supply chain.”
Sick, parceiro, but what caused ya to do that? He tells us:
“Since 2020, Azul has encountered a series of compounded challenges stemming from the COVID-19 global crisis, which crippled the aviation industry. The pandemic caused a sharp market downturn, enforced travel restrictions, and diminished demand, resulting in 93% reduction in Azul’s planned capacity in April 2020 compared to February 2020. Unlike its U.S. peers, however, there was no direct, broad-based government funding in Brazil for the aviation industry… Azul turned to the private debt and equity markets to address its losses occasioned by the COVID-19 pandemic.”
Which caused AZUL’s indebtedness to more than quadruple since 2019. That itself could be cause for concern, but the Brazilian real exacerbated an already sh*t situation …
Specifically, in ‘24, the real ended the year “... with a devaluation of 26.4%,” which was a colossal issue for the debtors because they predominantly collect revenues in that currency but pay a huge chunk of operating expenses – 43.6%, 45.5% and 52.7% in ‘24, ‘23, and ‘22, respectively – and service debt in other currencies (principally US dollars).