The Brazilian legislature has passed a bill that will provide R5 billion ($886 million) in credits for its struggling airlines.
The Brazilian Association of Airlines (ABEAR) said on 29 August that it sees the approval by Brazil’s lower house, the chamber of deputies “as positive” for airlines in that country. The credits will be provided by the country’s Civil Aviation National Funding (FNAC).
“A credit line in this direction may contribute to the economic sustainability of the companies, benefiting the whole chain of national tourism,” ABEAR says.
The bill is expected to be signed by Brazilian president Luiz Inacio Lulu da Silva, who had campaigned on promises to lower airfares for travellers. The Brazilian government has been discussing financial aid for its aviation sector since 2023.
Earlier this year, one of the country’s major airlines, Sao-Paulo-based Gol, filed for bankruptcy protection from creditors after numerous attempts to restructure its debt failed.
The company earlier this month posted a 2024 second-quarter loss of R3.9 billion as an unfavourable exchange rate hit the company’s earnings, and passenger capacity fell, denting revenues. However, on an adjusted basis, excluding the impact of exchange rate fluctuations, as well as other financial expenses, including R336 million from the Chapter 11 process it is currently undertaking, its loss during the period was R1 billion.
The real depreciated against the US dollar by 11.7% during the period, resulting in an increase in lease liabilities and loans denominated in foreign currency.
Gol gave little update on the restructuring process, only to say that it “currently expects that any proposed plan of reorganisation will include, among other things, mechanisms for the resolution of claims against the company and treatment of the company’s current creditors and shareholders”.
In May, the company had submitted a five-year financial plan to a US court as part of its bankruptcy process that calls for refinancing $2 billion in debt, an equity raise, and new deals for lessors.
Gol’s participation in the recently approved government credits is as yet unclear, however, as Brazilian law restricts companies which are in debt restructuring to access credit from public funds, local media have reported.
Brazilian peer airline Azul also noted that its second-quarter loss of R3.9 billion was, to a large extent, due to the rapid depreciation of the Real to the dollar, in addition to higher fuel costs. Adjusted for the exchange rates as well as unrealised derivative results and other financial expenses, Azul says it lost R$744 million during the second three-month period of the year. That is 31% more than last year.
Both Gol and Azul also struggled with the closure of Salgado Filho International airport – which serves the southern Brazilian city of Porto Alegre – in the state of Rio Grande do Sul after floods in May, resulting in cancellations of scheduled flights. A partial reopening of the airport is scheduled for late October.
During the Covid-19 pandemic in 2020, three Latin American airlines – Colombia’s Avianca, Aeromexico and LATAM Airlines Group, based in Chile – sought Chapter 11 bankruptcy protection from creditor claims. All three emerged from the process by 2022.
