Azul Airlines and the imperative of strategic realignment 

AeroTime is pleased to welcome a new columnist with global aviation expertise. René Armas Maes is an international consultant specializing in airline restructuring, strategic planning, revenue optimization, and cost reduction. 

René began his career as a Senior Analyst at Simat, Helliesen & Eichner in New York City, where he advised global airlines, airports, regional aviation operators, and business aviation clients. Today, he works with airlines and airports worldwide and serves as an instructor for IATA and ACI in airline and airport management. He also holds an MBA from the John Molson School of Business in Montreal, Canada. 

The views and opinions expressed in this column are solely those of the author and do not necessarily reflect the official policy or position of AeroTime. 

The recent Chapter 11 filing by Azul Airlines in May 2025 marks a significant turning point for the Brazilian carrier, underscoring both the fragility and complexity of operating in Latin America’s turbulent aviation landscape. 

Hardly unprecedented in a region known for economic volatility and currency shocks, Azul’s bankruptcy filing was widely expected. Just months earlier, the airline had closed a Superpriority Notes offering aimed at refinancing existing obligations and enhancing liquidity. It had also renegotiated terms with key stakeholders, including bondholders, aircraft lessors, and Original Equipment Manufacturers (OEMs). In the event, though, these measures proved insufficient to stave off a financial reckoning. 

A region of contrasts 

Azul’s decision to seek Chapter 11 protection places it on a path well known by its regional peers – albeit perhaps too late. During the pandemic, carriers such as LATAM Airlines, Avianca and Aeromexico proactively filed for bankruptcy in the United States. Their early restructuring allowed them to reduce debt burdens, streamline fleets and recalibrate network strategies. Brazil’s two leading airlines, Azul and Gol, opted to defer similar action. Inevitably, that decision has had consequences. 

Gol eventually filed for Chapter 11 in January 2024 and emerged from bankruptcy in June 2025 with a healthier balance sheet and more flexible capital and cost structure. In contrast, Azul entered 2025 with mounting debt, an imbalanced revenue-cost structure and deteriorating liquidity, ultimately prompting its late-stage filing. The airline’s timing meant it entered the process amid a more challenging credit environment, with less patience amongst its investors and fewer tools at its disposal. 

Foreign currency risk and financial stress 

Azul’s financial strain was exacerbated by Brazil’s macroeconomic instability. At the end of 2024, approximately 46% of the airline’s operating expenses, including lease payments, aircraft debt service, and working capital, were denominated in foreign currencies. Meanwhile, 82% of its revenue was derived from domestic passengers paying in Brazilian reals. When the real depreciated by 27% against the US dollar during 2024, Azul’s dollar-linked costs soared. 

This stark mismatch of currency proved untenable. In Q1 2025, Azul’s net debt ballooned nearly 50% year-over-year. Its share price plummeted from US$8.50 to just US$0.50 before the Chapter 11 filing. Fitch Ratings downgraded the company to CCC-, reflecting a heightened risk of default. In stark contrast, LATAM and Avianca, buoyed by their earlier restructuring, are now being forecast to maintain gross leverage ratios between 2.5x and 3.5x. Azul’s leverage, on the other hand, is projected at around 5.0x this year, driven largely by high lease obligations and interest costs. 

Liquidity and revenue headwinds 

Despite efforts to cut costs and bolster liquidity, during 2024 Azul struggled to generate the free cash flow necessary to reinvest or even sustain operations. Passenger services accounted for 93% of total revenue that year, but fare increases were insufficient to offset spiraling costs. While fares rose modestly in Q1 2024, they plateaued in Q3 and declined in Q4, a concerning trend for a carrier heavily dependent on domestic demand. 

Seasonal fluctuations strained liquidity still further. With limited ancillary revenue – under US$20 per passenger – Azul had few buffers to absorb macroeconomic shocks. Creditors questioned the viability of the airline’s recovery plans, particularly given the lack of near-term liquidity, increasing interest rates and rising inflation. Brazil’s domestic capital markets also offered little respite, with investor appetite waning under broader economic pressures. 

Azul’s lease and debt obligations became increasingly difficult to meet. With 182 out of 220 aircraft leased in US dollars as of 2024, the company’s ability to refinance on favorable terms became doubtful. Additional aircraft on order, coupled with supply chain bottlenecks and delayed deliveries, only added to the burden. 

Fleet and network complexity 

Azul’s operational scale is impressive. It operates Brazil’s most expansive domestic network, with nearly 900 daily flights and over 400 non-stop routes. Its diverse fleet of 137 aircraft spans regional jets, turboprops, widebodies, and cargo aircraft. Yet this breadth is both a strength and a liability. The carrier’s high labor efficiency – 85 full-time employees per aircraft, compared to 104 at Gol and 111 at LATAM – is commendable, but on its own this cannot counterbalance the costs associated with fleet complexity. 

As of December 2024, the airline’s fleet includes Embraer E-Jets, ATR 72s, Airbus A320-family jets, Airbus A330s, Boeing 737 freighters, and Cessna Caravans. This diversity creates significant logistical and cost challenges related to maintenance, training, spare parts, and engine management. Moreover, the viability of Azul’s cargo operations, while potentially lucrative, is undermined by limited scale and operational redundancy. 

A strategic reset 

Chapter 11 offers Azul a pivotal opportunity to recalibrate its business model for long-term sustainability. While reducing leverage and restoring liquidity are immediate goals, the airline must also undertake deeper structural transformation in order to regain competitiveness. One critical step would be the divestiture of non-core assets such as maintenance, repair, and overhaul (MRO) facilities and full-flight simulators, which could generate much-needed capital and allow management to focus on core operational priorities. 

At the network level, Azul should concentrate on high-demand, high-yield routes, both business and leisure, while phasing out marginal or underperforming markets. Rationalizing seasonal and regional routes would help improve aircraft utilization and bolster key metrics like PRASK. 

Fleet simplification is equally important. By consolidating aircraft types – ideally to a total of no more than three – Azul could achieve significant operational efficiencies. Replacing smaller regional aircraft with larger, next-generation narrowbodies would reduce unit costs (CASK) and improve per-departure revenue.  

The airline should also address its limited ancillary revenue potential. Raising ancillary revenue per passenger through offerings such as baggage fees, seat selection, onboard sales, and loyalty programs remains an untapped source of margin improvement, as evidenced by carriers like Ryanair, Spirit, Volaris and Wizz Air. In parallel, Azul could benefit from introducing two-class configurations on selected domestic routes to attract premium travelers and enable better revenue segmentation and enhanced ancillary revenue potential.  

Finally, a reassessment of Azul’s cargo strategy is warranted. Scaling back or divesting from dedicated freighter operations would allow it to concentrate its resources where returns are strongest, improving overall efficiency and financial performance. 

Azul’s path through Chapter 11 is not merely about financial repair. It is also a chance to fundamentally reshape the airline for a more resilient future. With thoughtful execution of a restructured fleet strategy, improved cost discipline and a leaner network model, Azul could regain competitiveness in a challenging market while competing in a more balanced field against LATAM and Gol. 

The airline’s ability to emerge from bankruptcy stronger will depend on its willingness to challenge legacy structures and make bold, forward-looking decisions. While the road ahead is complex, the case for decisive transformation has never been clearer. The post Azul Airlines and the imperative of strategic realignment  appeared first on AeroTime.

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