Brazilian low-cost airline GOL due to file Chapter 11 restructuring proposal

The owners of Brazilian low-cost airline GOL Linhas Aéreas Inteligentes SA (GOL) have announced that the carrier intends to file an initial proposed Chapter 11 plan of reorganization with the US Bankruptcy Court. The step follows a Plan Support Agreement (PSA) reached in November 2024 between Abra Group (the majority shareholder of GOL) and several of the main creditors of the Sao-Paulo-based budget airline. The PSA detailed extensive information regarding the treatment of the various groups of GOL creditors under the Chapter 11 process.

GOL, Brazil’s largest independent low-cost airline with a fleet of 139 Boeing 737 aircraft, originally filed for Chapter 11 bankruptcy protection in January 2024 as mounting losses and crippling aircraft leases threatened to sink the budget carrier. The Chapter 11 bankruptcy protection filing was made in the United States bankruptcy court of the Southern District of New York and requested the airline be given time to restructure its finances without the threat of legal action being taken by creditors which may have grounded the airline, perhaps permanently.

In October 2024, GOL then filed a request with the court seeking a 150-day extension to the protection period, stating it was continuing to make progress with its debt restructuring but would need additional time to complete the process.

Matheus Obst / ShutterstockAbra Group says that the airline has continued operating as normal throughout the Chapter 11 process to date. In the meantime, GOL has managed to secure access to additional liquidity and has finalized negotiations with lessors covering 139 aircraft leases and 58 engines, all of which were goals set out in its long-term business plan originally filed with the court. It has also engaged further with key stakeholders within the Abra Group itself to deleverage the airline’s balance sheet.  

According to an Abra statement, “The filing of the Plan Support Agreement represents an important milestone toward the successful completion of GOL’s financial and operational restructuring and implements a significant investment of new capital to support GOL’s business.”

Specific highlights of the PSA include GOL significantly deleveraging its balance sheet by either converting it into equity or writing off up to US$1.7 billion of its debt and up to US$850 million of other financial obligations. Additionally, Abra has agreed in principle to inject approximately US$950 million of new equity and possibly more into GOL, as well as assume US$850 million of GOL’s debt. Of this amount, $250 million will be mandatorily convertible into new equity as outlined in the Plan Support Agreement on or after the 30-month anniversary of GOL’s emergence from Chapter 11 based on GOL achieving certain valuation metrics.

Added to the Plan Support Agreement is GOL continuing to work to restructure aircraft leases under the agreements with lessors that have already been negotiated and agreed upon in the Chapter 11 process to date.

Miguel Lagoa / ShutterstockThe primary purpose of this latest filing is to allow GOL’s creditors who are entitled to vote on the PSA to make an informed decision on whether to vote to accept or reject it. However, it will now be up to the court to decide whether the terms of the restructuring plan are reasonable in the circumstances and that the interests of the airline, its shareholders, and its creditors are all equally represented and supported under the terms of both the PSA and the restructuring plan.    

Next steps

Should the restructuring plan be approved by the Bankruptcy Court, GOL will then commence a process to solicit votes on the PSA from creditors to obtain sufficient votes for confirmation of it. Lastly, once this stage in the process has been completed, GOL will be seeking the Bankruptcy Court’s approval for the final commencement of voting on the PSA at a hearing of the Bankruptcy Court which is scheduled for January 15, 2025.

Abra Group is a UK-based investment company but remains one of the largest air transport groups in Latin America. It owns the Avianca (Colombia) and GOL airline brands as well as holding a strategic investment in charter airline Wamos Air of Spain. The Group employs almost 30,000 staff between the group airlines and controls a fleet of more than 300 aircraft serving 25 countries and more than 130 destinations.

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