Brazil’s second and third largest airlines are working toward a merger, which would see them potentially become the biggest airline in the country (well, sort of).
In this post:
Azul & GOL want to merge, maintain separate brands
Azul and GOL are working toward a merger, as the companies have signed a non-binding memorandum to explore this. If this were to happen, it would create Brazil’s largest airline, with nearly 60% domestic market share, surpassing LATAM Brazil. If this deal gets approved, Azul and GOL would maintain their separate branding, despite the combined ownership.
For context on the two airlines:
- Azul has a fleet of around 160 aircraft, with another 80 or so aircraft on order; the carrier’s fleet consists of Airbus A320neos and A321neos, Airbus A330-200s and A330-900neos, ATR 72-600s, and Embraer E195s and E195-E2s
- GOL has a fleet of around 130 aircraft, with another 100 or so on order; the carrier’s fleet consists exclusively of Boeing 737s, including 737-700s, 737-800s, and 737 MAX 8s
The argument in favor of the merger would be to allow for better connectivity and lower cost of capital, including more leverage when negotiating with aircraft manufacturers. Obviously there are some competition concerns, but the companies claim that plenty of countries have dominant airlines, and do just fine. Lufthansa in Germany is cited as an example, and I’m not sure that really demonstrates the point in a good way. 😉
Keep in mind that the majority investor in GOL is Abra Group, which is also the primary investor in avianca, another South American mega-carrier. Talks between Azul and GOL had reportedly been going on for quite some time, given the challenges that aviation in the region faces. Both airlines have faced financial struggles. In June 2024, GOL filed for Chapter 11 bankruptcy protection, while Azul has been striking deals with lessors to swap debt for equity.
If the combination were to happen, the new company would have three board members appointed by Azul, three appointed by Abra, and three appointed independently. Azul would get to name the company’s CEO, and Abra would get to name the company’s chairman.
Regulatory approval can be hard to secure in Brazil, though the airlines argue that they’re complementary to one another, with 90% of their networks not being overlapping. GOL is majorly focused on the biggest markets, like Sao Paulo, Rio de Janeiro, and Brasilia, while Azul’s network is more varied.
My take on a merger between Azul & GOL
While we’ll see how this plays out, my initial thought is that I think there could be merit to this merger, and it might even be good for consumers.
First, it has to be acknowledged how rough aviation has been in South America in recent years. We’ve seen so many airlines go through bankruptcy proceedings, so obviously the region has an issue with airline profitability. As much as we’ve seen consolidation, there are probably still some opportunities.
On the surface, I think Azul and GOL are actually pretty complementary. Here are a few things that come to mind:
- Both airlines have a generally similar vibe and business model, and are kind of JetBlue(ish) — Azul was even founded by David Neeleman, the same guy behind JetBlue
- While the combined company’s fleet would be all over the place, at least the airlines have generally similar products; for example, on narrow body planes, neither airline has business class, but instead has a “premium” product with extra legroom (GOL blocks middle seats, while Azul doesn’t)
- One quirk with Azul is that the airline operates long haul flights out of Viracopos International Airport (VCP), rather than out of Sao Paulo Guarulhos Airport (GRU)
- I think there could be merit to a combined airline offering much better connectivity, and providing better feed to Azul’s long haul filghts
- It also seems like there’s potential for the combined airline to join an alliance; SkyTeam is out of the picture because since Delta owns a stake in LATAM, but oneworld or Star Alliance could make sense
- The concept of maintaining independent branding for the airlines is a bit odd to me, since you’d think there would be merit to just going all-in on one brand and network; though perhaps that’s intended to somehow make regulators feel better about maintaining competition?
Anyway, I’m curious to see how this all plays out. Personally I think there’s potential for Azul’s long haul network to become more compelling with better connectivity, and perhaps a combined airline could help accomplish that.
Bottom line
Azul and GOL are working toward a merger, to form Brazil’s largest airline. The plan is for the two carriers to maintain separate branding, but to benefit from better connectivity and a lower cost of capital.
While mergers generally aren’t good for consumers, I see merit to this agreement. I’ve always felt like Azul never tapped into its full potential, so maybe this presents an interesting opportunity. Now, regulatory approval for the deal might be a challenge, so let’s see how this plays out.
What do you make of the prospect of Azul & GOL merging?
I'm not convinced that any merger of this scale benefits consumers. Have any of the major mergers in the USA over the last 15-20 years yielded any consumer benefits?
I have flown both and both were acceptable and somewhat similar. Alliance Membership would be a huge step up and I would prefer ONEWORLD over STAR. AA has an investment in GOL and more than likely another OW Carrier like Qatar or IAG could seek investing into the carriers. OW lost out when LATAM bolted in the arms of DL prior to BK but I question why all the other OW carriers continue to codeshare...
I have flown both and both were acceptable and somewhat similar. Alliance Membership would be a huge step up and I would prefer ONEWORLD over STAR. AA has an investment in GOL and more than likely another OW Carrier like Qatar or IAG could seek investing into the carriers. OW lost out when LATAM bolted in the arms of DL prior to BK but I question why all the other OW carriers continue to codeshare with LATAM. DL will never focus on South America like AA does with their MIA and DFW Gateways. I also like the idea of resurrecting the VARIG name just so the baggage doesn't come with it. IAG is rumored to be looking at acquiring a stake in TAP and the Brazil Market would be a key addition for OW.
Investments in GOL ?
- $100 million by AF, in 2016
- $200 million by AA in 2021/22 (5.2% of total mkt cap).
Does United still have a investment in Azul?
GOL owns the rights to the Varig brand. Great opportunity to bring it back for a Azul-GOL merged airline.
Great Idea. I was actually thinking the same thing
Why Oneworld? AFKL have a stake in Gol and they derive a huge amount of connecting business from them, and LATAM are still more or less partnering with IB as well as DL/VS.
Since Avianca Brazil went bust, that group hasn't had any hubs in the Southern Cone. As Azul don't have any continental flights to Colombia , Venezuela or even anywhere west of ASU, BOG-GRU/GIG is something like 7 hours, and Avianca don't fly...
Why Oneworld? AFKL have a stake in Gol and they derive a huge amount of connecting business from them, and LATAM are still more or less partnering with IB as well as DL/VS.
Since Avianca Brazil went bust, that group hasn't had any hubs in the Southern Cone. As Azul don't have any continental flights to Colombia , Venezuela or even anywhere west of ASU, BOG-GRU/GIG is something like 7 hours, and Avianca don't fly to places like Belo Horizonte or FLN, the networks are pretty complementary and Star Alliance would also likely bring them more passengers than an alliance with no hubs south of MIA.
(That's obviously not to say they couldn't have individual partnerships with AA, AC, EK or whatever)
Since Gol is currently in chapter 11 reorganization, all equity is likely to be wiped out as part of the restructuring. Airlines may choose to reinvest, but current equity arrangements are not likely to survive. of course, Gol can maintain other non-equity partnerships
I'm not au fait with the c.11 arrangements but I think that, with or without equity, the strong link between Gol and AFKL is likely to remain in place because it does drive a lot of traffic. LATAM has its own flights to Europe and long-standing partnerships with various airlines there- they don't seem very keen on joining Skyteam. Equally DL won't want Gol/Azul in the alliance, so *A is probably the best choice if the merger goes ahead.
Avianca flew BOG to Belo Horizonte (CNF) for much of 2023 and 2024 but recently canceled the route. 6 hours in the very tight rows was my worst flight in a long time.
Gol actually flies CNF to Buenos Aires (EZE) to BOG and back twice a week on a single flight number. Struck me as odd that a Brazilian carrier flew BOG-EZE until I learned it was the same owner as Avianca.
That EZE route's being axed soon I believe.
Also Ben, I thing you forgot to mention two things:
1) President Lula loves his national champions. There will no regulatory barrier in Brasil.
2) Oneworld, or Star Alliance?
Azul is the Brazilian Jetblue with the better service. Gol isn't. Azul is also better managed than Gol.
Hopefully this is Azul taking over Gol, and not the other way around.