GOL Exits Bankruptcy as Azul’s Financial Crisis Threatens Potential Merger

GOL Linhas Aéreas Inteligentes received U.S. Bankruptcy Court approval for its Chapter 11 restructuring plan on May 20, 2025. The Brazilian airline expects to emerge from bankruptcy by June 6, ending a process that began in January 2024.

The restructuring will significantly reduce GOL’s debt burden by converting or eliminating approximately $1.6 billion of pre-bankruptcy funded debt. The airline will also remove about $850 million in other obligations from its balance sheet.

GOL secured $1.9 billion in exit financing last week, with $1.25 billion coming from anchor investors Castlelake and Elliott Investment Management. GOL’s shares responded positively to the news, jumping 12.09% to R$1.02 in Tuesday’s trading.

The company projects a strong liquidity position of around $900 million upon exit with leverage of 5.4 times. This ratio is expected to decrease to 2.9 times by the end of 2027.

Abra Group Limited, which previously controlled GOL with roughly 54% of capital, will remain the largest indirect shareholder. Sources indicate Abra’s stake may increase to over 75% following the restructuring.

GOL has scheduled a shareholders’ meeting for May 30 to approve the capital increase outlined in the plan. Meanwhile, Azul faces mounting financial troubles that threaten the potential merger between Brazil’s two major airlines.

Azul’s cash position has deteriorated dramatically, falling to R$655 million at the end of Q1 2025. This represents a 51% drop compared to the same period in 2024.

Credit rating agencies have downgraded Azul, with S&P lowering its rating from CCC+ to CCC- on May 20. The downgrade reflects “very tight liquidity” and “increased default risk in the next few months.” S&P forecasts significant cash flow deficits for Azul in 2025.

Azul CEO John Rodgerson notably declined to comment on bankruptcy speculation during a recent press conference. This marked a shift from his previous firm denials of such possibilities.

Azul stated it is “constantly evaluating opportunities to improve liquidity and capital structure.” The merger talks between GOL and Azul shareholders, formalized in January 2025, now face a significant hurdle.

One condition requires that any merged entity cannot have higher leverage than GOL at the time of union. With GOL’s debt decreasing and Azul’s crisis deepening, the path to consolidation appears increasingly complex.