Although rates rose last year due to increased demand for air travel, the finances of both companies have been affected by rising fuel prices and delays in the production of new planes.
Brazilian airline Azul is working with Citigroup and Guggenheim Partners as it explores a possible bid for competitor Gol, which is currently in the midst of solvency problems, according to people familiar with the matter consulted by Bloomberg.
Both financial firms are advising Azul as it weighs various options, including a direct acquisition of its rival. At the moment, these discussions are still private, and the option for Azul to back down on this idea has not been ruled out.
Any offer would need approval from the country's anti-competition regulator, known as the Administrative Council for Economic Defense (CADE).
Sao Paulo-based Gol filed for Chapter 11 after dealing with $2.7 billion in short-term liabilities and carrying out a dozen debt swaps. Within the framework of the process, it has managed to increase its financing to US$ 1,000 million from US$ 950 million.
Recently, the CEO of Azul, John Peter Rodgerson, already announced in an interview with that medium that his company was closely following Gol's situation. "You have an obligation to your shareholders to study the opportunities that arise," he said, declining to give more details.
Although both airlines cover some highly frequented routes, Gol focuses more on flights between Sao Paulo, Rio de Janeiro and Brasilia, while Azul's network to other cities is broader.
Azul hopes that the lack of overlap between the airlines will strengthen its chances of obtaining approval from regulatory bodies if it submits a bid.
Although rates rose last year due to increased demand for air travel, the finances of both companies have been affected by rising fuel prices and delays in the production of new planes.
Azul has tried to clean up its balance sheet by cutting costs and reaching agreements with landlords. The company has also delayed debt payments by swapping bonds maturing in 2024 and 2026 for securities with later maturities that paid a higher coupon.
