Latin America becomes battleground for U.S. airlines

Both airlines have committed to investing up to $300 million after Azul’s court-supervised reorganization in the United States.

Until recently, industry expectations were that strategic partners—chief among them Air France-KLM and especially American—would inject capital into Gol’s own Chapter 11 process. That did not materialize. However, sources say the door remains open: in 2027, a window is expected for strategic investors to acquire equity stakes in Gol.

According to people familiar with the discussions, the support from American Airlines and United for Azul is partly motivated by the possibility of a tie-up between Azul and Gol in the Brazilian market—a scenario disclosed by the companies’ shareholders in mid-January. If the deal moves forward, whichever U.S. carrier is left out could lose significant ground in Latin America.

“I see both of them joining Azul’s Chapter 11 as a way to neutralize each other. It’s a competitive move—if one acts, the other feels compelled to follow,” said one source close to the matter.

Delta, a key U.S. rival, already has a strong partnership with Latam via a joint venture formalized in 2020 and approved by regulators in the years that followed. Since the JV was implemented in October 2022, passenger traffic between Brazil and the U.S. on Delta and Latam rose from 797,000 in 2022 to 2 million in 2024, according to data from Brazil’s National Civil Aviation Agency (ANAC).

American Airlines invested $200 million in Gol in 2022, acquiring roughly 5% of the Brazilian carrier at the time (now diluted). The deal also gave American Airlines three years of exclusive codeshare rights for North-South America routes with Gol—a period that ended this past April.

United, a longstanding Azul partner and shareholder, had a similar exclusive codeshare agreement with Azul, which expired in February and was not renewed. At the same time, United also owns approximately 5% of Abra, the holding company that controls Gol and Colombian airline Avianca.

Speaking to reporters on July 24, Azul executives reiterated that the company is still negotiating the terms of its exit financing, a stage in which American and United could contribute up to $300 million. The investment is subject to conditions that have not yet been disclosed to the market.

News of the proposed investment in Azul initially confused financial circles, raising doubts about the future of American Airlines’ partnership with Gol. The uncertainty grew as the exclusivity period between the two carriers expired on April 25.

American Airlines later issued a public statement clarifying that its potential investment in Azul does not affect its partnership with Gol.

Gol currently handles 98% of American Airlines’ connecting traffic in Brazil—a level of service that Azul is unlikely to match, given Gol’s dominance at the Galeão and Guarulhos airports, both critical international hubs.

As Valor previously reported in January, Gol had been in talks with international partners to raise capital as part of its exit from Chapter 11. According to sources, negotiations were progressing, but amid market turbulence—including debates over airfares and heightened currency volatility—Gol opted to conclude its restructuring as quickly as possible.

Sources noted, however, that Gol has left the door open for a potential strategic investment in mid-2027, when the company aims to raise around $300 million through an equity offering. “The thinking was: better to get out now than to wait,” said one person familiar with the decision.

The same source added that Azul’s entry into Chapter 11 improved the chances of a future combination with Gol. “Abra’s team didn’t believe Azul’s restructuring, as it was originally being handled, would work. The Abra team is made up of bankers who know Chapter 11 well,” the source noted.

The fate of a potential merger still depends on Abra’s assessment of Azul’s reorganization exit plan, which is currently in development.

Azul expects to present the plan to creditors by mid-September.

On July 24, the company announced it had secured the release of approximately $1.1 billion from the second tranche of its debtor-in-possession (DIP) loan, a key component of its ongoing restructuring process in the U.S. Of that total, $200 million went to the company’s cash reserves and the remainder was used to pay down priority debt.

Abra, Gol, Azul, United, and American Airlines all declined to comment.

*By Cristian Favaro — São Paulo

Source: Valor International

https://valorinternational.globo.com/