Azul working with Citi, Guggenheim as it mulls bid for rival Gol

Brazil air carrier Azul SA is working with Citigroup Inc. and Guggenheim Partners as it explores a potential offer for its troubled competitor Gol Linhas Aereas Inteligentes SA, according to people familiar with the matter.

The companies are advising Azul as it weighs several options, including an outright acquisition of its rival, one of the people said, asking not to be identified because discussions are still private. Azul still could decide to shelve the idea, the person added. 

Azul didn’t return requests for comment. Guggenheim and Citi declined to comment.

Any offer would need approval from the country’s regulator — known as Cade.

Sao Paulo-based Gol filed for Chapter 11 after grappling with $2.7 billion in near-term liabilities and carrying out a dozen debt exchanges. Under the process, it has managed to increase its debtor-in-possession financing to $1 billion from $950 million. 

Azul and Gol are part of a trio of carriers — including Santiago-based  Latam Airlines Group SA — that dominate air travel in Latin America’s largest market. While both airlines service some heavily trafficked routes, Gol is more concentrated on flights between Sao Paulo, Rio de Janeiro and Brasilia, while Azul’s network to other cities is wider.  

Azul expects the lack of overlap between the carriers to bolster its chances of winning regulatory approval should it make an offer, the person said. 

When asked about a potential tie up, Azul’s Chief Executive Officer John Peter Rodgerson said in an interview with Bloomberg News that his company is closely monitoring the situation. “You have an obligation to your shareholders to look at what opportunities are out there,” he said, declining to elaborate further. 

Despite jacking up fares last year as demand for air travel rose, both companies’ finances have been hit by rising jet fuel prices and delays in the production of new aircraft. 

Azul has moved to shore up its balance sheet by slashing costs and striking agreements with lessors. The company also pushed back debt payments by exchanging bonds due in 2024 and 2026 for securities with later maturities that paid a higher coupon. The transaction was considered a distressed debt change by ratings agencies.