Brazil's third-largest airline, Azul Linhas Aéreas Brasileiras (AD, São Paulo Viracopos), is considering filing for Chapter 11 after accumulating debts of USD5.35 billion since the Covid-19 pandemic began. Chapter 11 is one of several options reportedly under consideration by the beleaguered carrier, with others including another capital raising or a merger with another airline.

Bloomberg cites people familiar with the talks but notes that while discussions are underway, no decision on any Chapter 11 filing has been made. The airline issued a statement on the matter on May 16, 2025, that neither explicitly confirmed nor denied the report.

"In the ordinary course of its financial and strategic management, [Azul] constantly monitors alternatives that may contribute to strengthening its capital structure and preserving liquidity, with a focus on the long-term sustainability of its operations," it declared. "Azul will keep its shareholders and the market informed of any developments resulting from such discussions and of any other relevant fact or information in accordance with applicable regulations."

The possibility of a Chapter 11 filing was not raised during a May 14 quarterly earnings call, with CEO John Rodgerson instead telling analysts that Azul was significantly improving its business and was laser-focused on efficiency.

"We are focused on turning Azul into a lean operating airline," he said. "We have made significant progress so far, but there is still more that we can do."

A recent financial restructuring saw Azul secure agreements with bondholders, lessors, and OEMs to eliminate early USD1.6 billion in debt from its balance sheet and raise an additional USD525 million.

"We've had three equity offers over the last few months," CFO Alexandre Malfitani said during the call. One was to equitise [debt] to lessors; one was for the controlling shareholders to bring more money into the company; and more recently, the equitisation of 35% of our 2029 and 2030 notes."

"Obviously, it would make sense for us to bring in additional equity capita, but we'll find the right time to do that," he added.

Malfitani noted that an equity offer in April fell flat, with the markets not liking the timing. "We didn't get an incremental raise, but we were successful in equitising a significant amount of debt and reducing our leverage," he said.

Speaking about the non-binding merger agreement that Azul signed with Abra Group, owner of GOL Linhas Aéreas Inteligentes, earlier this year, Malfitani said the talks continue. However, GOL wanted to exit its own Chapter 11 process (due to happen in June) first. "Discussions continue on many fronts," he said, "including valuation, antitrust documentation, and those kinds of things."

When first flagged, Rodgerson said the combined carrier would be “a national champion” in Brazil.

On the same day as the earnings call, Azul reported an adjusted net loss of BRL1.82 billion reais (USD321 million) for the first quarter of 2025, a 460% increase on the reported loss on the comparable 2024 quarter. The airline attributed this to higher operating costs and the depreciation of the Brazilian real. Net debt stood at BRL31.35 billion (USD5.53 billion) as of 31 March, 50.3% less than the net debt figure reported for March 31, 2024.