Talks for Gol and Azul, two of Brazil’s largest airlines, to move towards a merger have progressed, according to reports from people involved in the matter.
The next step should be taken soon, when the companies plan to announce a Memorandum of Understanding, revealed the newspaper Valor Econômico.
The idea is for them to become part of a corporation without a defined controlling shareholder. Currently Azul’s main partner is David Neeleman, an entrepreneur who also owns the US carrier Breeze.
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Gol is part of the Abra Group, which includes Avianca, from Colombia, and also has shares in the Spanish company Wamos, specialized in wet-leasing.
The shares of both airlines closed sharply higher on Thursday, in anticipation of the announcement.
Azul, which is also facing financial difficulties, approached Abra’s executives after Gol filed for financial restructuring in the US, known as Chapter 11, on January 25, 2024.
Since then, the company has been negotiating with its creditors and recently filed a recovery plan that foresees a business merger with Azul, but without determining a single model.
Among the options are a strategic combination with Abra, a joint venture, a share offering or even a Gol bankruptcy filing.
Merger would create the largest Brazilian airline
The merger of Gol and Azul would create the largest Brazilian airline, with 60% of the market compared to 39% for LATAM, currently the leader in market share.
With different flight network profiles, Gol operates domestic flights between larger cities while Azul has greater capillarity thanks to its more diverse fleet.
In terms of aircraft, however, the two have almost no synergies. Gol only has the Boeing 737 as its standard aircraft, while Azul flies Embraer and Airbus jets, with single and twin aisles. In addition, there are 40 ATR turboprops that cover regional routes.
Together, they would have 325 aircraft, but a combined operation would certainly mean a reduction in the fleet.
Despite the potential gains from the merger, it remains to be seen whether Cade, the Brazilian antitrust authority, would approve a possible agreement, given the market concentration.
Passengers would be left with practically two options for domestic flights, harming competitiveness and encouraging higher fares.
