Azul Strengthens Embraer: Debt Forgiveness through Shares

The Brazilian airline Azul has reached a significant agreement with its lessors, which includes reducing obligations by over 500 million dollars through the allocation of company shares. This development is seen by analysts as positive news for the aircraft manufacturer Embraer, as it alleviates concerns about the debt of an important customer. At the end of the first half of the year, Azul's fleet consisted of 21 modern E2 jets, with further deliveries planned for this year. John Rodgerson, CEO of Azul, expressed optimism, emphasizing that a stronger Azul would also be beneficial for Embraer. As part of the agreement, Azul allocated up to 100 million company shares to the lessors to offset obligations of approximately 3 billion Reais. In Brazil's highly competitive domestic market, Azul competes against LATAM and Gol, focusing on expanding its fleet with Embraer jets. In August, the company announced plans to receive between 15 and 18 new aircraft by the end of 2025. Azul has firm orders for 51 E195-E2 jets, which accounted for 13% of Embraer's commercial order backlog and 28% of orders for the E195-E2 as of June, according to JPMorgan analyst Marcelo Motta. Had Azul filed for Chapter 11 bankruptcy protection, Embraer would have had to put advance payments for the orders on hold, leading to a significant financial loss. Following this agreement, Azul and Embraer's shares remained robust in trading activities in São Paulo compared to the declining Bovespa index. Despite delays in aircraft deliveries due to supply chain difficulties, Rodgerson hopes for the delivery of more jets before Christmas.