Abra Group and Brazilian carrier Azul have entered a memorandum of understanding (MoU) to explore a combination that would create Brazil’s largest airline via a tie-up with Gol.
Abra, which owns Gol and Colombia’s Avianca, informed shareholders on 15 January of its “intent to explore a combination of business in Brazil” with Azul.
The MoU represents “an initial stage of a negotiation process between Abra and Azul to explore the feasibility of a potential transaction”, according to Sao Paulo-based Gol.
”The agreement has no impact on Gol’s strategy, conduct of business or day-to-day operations,” Gol says, adding that the negotiation will not affect its ongoing Chapter 11 restructuring.
Gol intends to emerge from the bankruptcy process as a “well-capitalised standalone company” after filing for Chapter 11 protection in US District Court last year.
Under such a deal, both Gol and Azul would maintain separate customer-facing brands and operating certificates.
“Other areas are expected to be combined to enable more offerings and products to customers and to obtain efficiency gains,” Azul says.
”The enhanced customer offerings and efficiency provided by this transaction will further allow the combined entity to continue growing and developing aviation in Brazil, through a network that serves the highest number of destinations in the country, supported by a flexible fleet and with a focus on service excellence,” it adds.
The parties have also agreed “to a business principle that any combination will result in net leverage of the combined entity that will be at least comparable to the net leverage of Gol immediately preceding the closing of the potential transaction”, Gol says.
Also on 15 January, Gol released an updated five-year financial plan that will guide its Chapter 11 reorganisation.
”We are pleased to be taking another step forward in our financial restructuring plan,” Celso Ferrer, Gol’s chief executive.
”Since commencing this process last year, we have secured lessor concessions, addressed maintenance and past-due liabilities, launched a profit-improvement plan and reached agreements… [to] de-leverage Gol’s balance sheet.”
The plan calls for Gol to expand its fleet to 167 aircraft by 2029. The carrier currently operates nearly 140 jets, Airline Business data show.
The company also plans to raise an additional $330 million of equity, combined with a $1.5 billion five-year debt financing raise.
“The conversion described above is expected to result in a significant dilution of Gol’s existing shares,” the company says.
