AIRLINES & ALLIANCES

Azul-GOL Merger: Unlocking Growth, Synergies, and a New Era in Brazilian Aviation

Azul remains optimistic about the advantages of a potential merger with domestic competitor GOL, emphasizing the key benefits it foresees for both consumers and the Brazilian aviation market. The integration would not only create one of the largest airlines in Latin America but also unlock significant synergies in customer service, experience, and loyalty programs.

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Azul Airlines

Azul-GOL Merger: Unlocking Growth, Synergies, and a New Era in Brazilian Aviation

Azul remains optimistic about the advantages of a potential merger with domestic competitor GOL, emphasizing the key benefits it foresees for both consumers and the Brazilian aviation market. The integration would not only create one of the largest airlines in Latin America but also unlock significant synergies in customer service, experience, and loyalty programs.

Strategic Vision and Growth Potential

“We’re really confident in the technical analysis and what we propose,” stated Azul Linhas Aéreas Brasileiras President Abhi Shah during a February 24 earnings call. He highlighted the minimal overlap between the two airlines’ route networks as a “key driver” of growth. With ambitions to expand service to 200 cities across Brazil, Shah noted, “we think we can do that when we have these networks that are very, very complementary.”

Shah also expressed confidence in building a globally competitive airline by improving efficiencies in areas such as aircraft maintenance, supplier relationships, and access to capital, emphasizing that these factors are “critical to keep this market growing” and that Azul sees “significant consumer benefit.”

In January 2025, Azul and GOL’s parent company, Abra Group, signed a non-binding memorandum of understanding (MoU) to integrate their Brazilian operations while maintaining separate airline operating certificates. The proposed deal remains subject to necessary approvals, conditions tied to GOL’s Chapter 11 restructuring—expected to conclude in May—and economic terms to be agreed upon by Azul and Abra.

Fleet and Operational Alignment

GOL exclusively operates Boeing 737 aircraft, with its fleet expected to reach 140 by the end of 2025. In contrast, Azul flies a diverse mix of Airbus A320neo and A330 aircraft, along with Embraer E195s, E195-E2s, and ATR 72-600s. By the end of 2024, Azul had 181 aircraft in service and expects future deliveries to consist solely of E2s, with 46 still on order, according to the Aviation Week Network Fleet Discovery database.

“Our focus is going to be on the E2—obviously we’re pushing Embraer and, like every OEM in the world, they have their challenges,” Shah told investors. He added that the airline is continuously monitoring its supply chain and working closely with manufacturers. Azul also plans to phase out some older E195-E1 and ATR aircraft, of which it currently operates 27 each, according to Fleet Discovery. Overall, the airline anticipates a 10-12% increase in capacity in 2025, largely driven by international expansion.

“The reason international is much higher is because one of the largest OEM impacts we had last year was on the widebodies,” Shah explained, referring to delivery delays in 2024 and the significant impact of Rolls-Royce engine issues on its long-haul fleet. Additional challenges faced by Azul in 2024 included a six-month closure of Porto Alegre airport due to severe flooding, currency devaluation, and unexpectedly high fuel prices.

Synergies in Customer Service and Experience

By integrating their operations, Azul and GOL can leverage their complementary route networks to provide passengers with a broader array of destinations and more seamless travel experiences. This expanded network is expected to improve connectivity, reduce layover times, and offer more convenient flight options, thereby enhancing overall customer satisfaction.

Both airlines have a strong commitment to customer service excellence. Azul is renowned for its in-flight entertainment and comfortable seating, while GOL is recognized for its punctuality and efficient operations. The merger would allow the combined entity to adopt best practices from both carriers, leading to an elevated standard of service.

Loyalty Program Integration: A Latin American Giant in the Making

Azul’s loyalty program, Azul Fidelidade, and GOL’s Smiles program have been instrumental in fostering customer loyalty. Prior to the merger discussions, the two airlines initiated a codeshare agreement in May 2024, which included provisions for loyalty program integration. This partnership enabled members of both programs to earn points or miles on codeshare flights, providing greater flexibility and value.

While specific membership numbers for Azul Fidelidade and Smiles have not been publicly disclosed, the unification of these programs is anticipated to create one of the largest frequent flyer communities in Latin America. This consolidation would offer members enhanced benefits, such as increased opportunities for earning and redeeming points, access to a wider range of destinations, and a more comprehensive suite of partner services.

The combined loyalty program is expected to leverage the strengths of both existing programs, providing a more rewarding experience for frequent travelers and strengthening customer retention for the merged airline.

Financial Performance and Market Outlook

For the full year 2024, Azul reported an EBITDA of BRL6 billion ($1 billion), with adjusted EBITDA—excluding non-recurring items—growing 16.4% year-over-year to BRL6.1 billion.

“2024 was the best year in our history in terms of EBITDA generation,” said Azul CEO John Rodgerson. “2025 in turn is expected to be even brighter with significant revenue growth.”

While the airline did not provide Q1 guidance, it reaffirmed its 2025 outlook, projecting a record EBITDA of BRL7.4 billion.

In Q4 2024, Azul’s operating revenues increased by 10.2% to BRL5.5 billion, driven by strong demand, a diversified business model, and higher capacity. However, the airline posted a Q4 net loss of BRL3.9 billion, compared to a net income of BRL403.3 million in the same period the previous year. For the full year, Azul’s operating revenue rose 4.4% to BRL19.5 billion, but it recorded a net loss of BRL8.2 billion for 2024—sharply higher than the BRL700.3 million net loss in 2023.

During Q4, revenue from Azul’s diversified business units contributed 23% of revenue per available seat kilometer and 24% of EBITDA. The company’s loyalty program posted a 27% year-over-year increase in gross billings, while its vacations segment saw a 63% surge in gross bookings. Azul Cargo also experienced 5.4% revenue growth. Meanwhile, Azul’s co-branded credit card continues to expand, now accounting for 0.5% of Brazil’s GDP.

“Let me say that again, a half a percent of the value of Brazil’s GDP is spent on the Azul credit card,” Rodgerson emphasized.

Financial Strength and Restructuring Efforts

In January, Azul successfully concluded agreements with bondholders, lessors, and original equipment manufacturers (OEMs), alongside closing a previously announced $525 million offering of Superpriority Notes due in 2030. These moves helped eliminate over $1.6 billion in debt, with Azul estimating an annual cash flow improvement of up to $200 million as a result of its balance sheet restructuring.

Unlike Aeromexico, Avianca, LATAM Airlines Group, and GOL, Azul has avoided filing for Chapter 11 bankruptcyduring or after the pandemic.

“By achieving these results, we have strengthened our balance sheet, and we can now turn our attention to executing our margin expansion plan and generating positive free cash flow, as we continue to add larger, next-generation aircraft to our fleet,” Rodgerson stated. “The year’s results demonstrate the strength and uniqueness of our business model, overcoming numerous challenges that were outside of our control.”

The proposed Azul-GOL merger represents a game-changing opportunity in Brazilian aviation, promising greater route connectivity, operational efficiency, and customer service excellence. Additionally, the integration of their loyalty programs would create one of the largest frequent flyer ecosystems in Latin America, offering unparalleled benefits to millions of travelers.

With strong financial momentum, a strategic growth plan, and a vision for a globally competitive airline, Azul and GOL are positioning themselves to redefine the aviation landscape in Brazil and beyond.

Source: GLO