Azul Airlines Receives US Court Approval, Expects Chapter 11 Exit by February

Brazilian airline Azul SA has received US court approval to implement its debt restructuring plan, clearing the way for a planned exit from Chapter 11 bankruptcy by February, company executives said.

The decision allows the airline to cut over $2 billion in debt and secure new equity investments from American Airlines and United Airlines.

US Bankruptcy Judge Sean Lane approved Azul's restructuring plan during a court hearing in White Plains, New York, on Friday.

The plan converts a large portion of the airline's pre-existing debt into equity and enables it to raise additional cash by selling new shares.

Under the agreement, American and United will each invest $100 million and receive 8.5% of Azul's new equity once the carrier exits bankruptcy, Bloomberg reported.

"We can now execute the plan, which is to convert all that debt, that burden," Azul CEO John Rodgerson told Reuters.

"This debt comes off my balance sheet and turns into equity, so we end up in a much lighter situation."

He added that the company expects to leave Chapter 11 with a leverage ratio of 2.5 times, below the initial forecast of 3.0 times.

Azul Airlines to Cut 60% of Debt in Chapter 11 Plan

The restructuring will reduce Azul's debt by roughly 60% and cut annual interest expenses by about $200 million.

According to Reuters, aircraft lease obligations are also expected to decrease by 28%, following settlements with major lessor AerCap.

The bankruptcy plan has received broad support from creditors, including bondholders owed about $1.8 billion, who have agreed to exchange their debt for equity in the reorganized airline.

Azul, a leading carrier in Brazil alongside Gol and LATAM, filed for Chapter 11 in May 2025 after facing pandemic-era financial strains, rising operational costs, and delays in aircraft deliveries.

The airline's move follows similar filings by Latin American competitors, including Gol, LATAM, and Aeromexico.

Earlier this year, Azul explored a potential merger with Gol, controlled by Abra Group, but those discussions ended in September.

"I'm super focused on our stand-alone plan," Rodgerson said, emphasizing the airline's commitment to its current restructuring path.

Once Chapter 11 proceedings conclude, Azul expects to emerge as a "more robust and resilient airline," with a healthier balance sheet and streamlined fleet.

The company's restructuring is still subject to regulatory approvals in Brazil, a company lawyer noted.

Originally published on vcpost.com