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).
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?
Membership is free and takes no more information than commenting as a guest. Earn status points for good contributions, and see fewer ads as your status grows.