Brazil’s Azul Airline Preparing to “Hibernate” During Pandemic

RIO DE JANEIRO, BRAZIL – “I don’t want to be saying something different each time. I want to come up with a clear solution about what to pay and when.” This is how Azul’s vice president of finances and investor relations, Alexandre Malfitani, described the number of experts the company hired to address the impact of the shutdown.

Brazilian airlines are currently operating at less than ten percent of their capacity for domestic flights. International flights have been completely suspended.

“We are at the height of uncertainty. We only know that at some point in the short term we will operate again. But no one knows exactly when or how fast things will return to normal,” he said.

He added that the company wants to be prepared for whatever may come. “Our duty at this time is to hibernate the company.” On Thursday morning, Azul announced the hiring of two large law firms – Thomaz Bastos, Waisberg, Kurzweil (TWK) Attorneys and Pinheiro Neto – to handle commitments and salaries, plus Galeazzi & Associates to reorganize the business and also Plane View Partners, which specializes in relationships with aircraft manufacturers and leasing companies.

Once there is a clearer picture, the goal is to develop a plan to be presented to creditors, with a “realistic” payment schedule, explained the executive. Among the most drastic measures taken by the company is also to place a significant number of employees on unpaid leave. For now, according to the vice president of finances, it is difficult to determine the future size of the business and Azul’s final targets.

Malfitani said Azul, like other companies in the sector, has suspended payments on aircraft lease agreements. The company’s financial statement for December recorded R$15 billion in liabilities, of which R$11.1 billion related to leasing commitments. Azul had R$6 billion cash at the time – with around R$3.1 billion effectively free for use.

The executive said the situation has affected the entire sector and there is no fear of losing planes to repossession by aircraft lessors. “There is no specific fear regarding Azul. Will the lessor pull our aircraft and deliver them to whoever is operating? Where does anyone operate today? He’d rather leave it with me for when the market picks up.”

Azul, as well as Gol and Latam, are awaiting the development of an aid package for the sector, which is being prepared by BNDES (National Bank for Economic and Social Development) and will rely on a partnership with major commercial banks Itaú, Bradesco, Santander and Bank of Brazil, as well as specialized funds.

The government’s plan is for BNDES to provide each airline company with R$3 billion in debt instruments (debentures) and shares (subscription bonuses).

Source: Exame