Gol, one of the three major players in the Brazilian airline market, issued a request for bankruptcy protection in the U.S. at the end of January. Latam, which along with Azul makes up the rest of the big trio, had done the same in 2020.
Even after a robust resumption of civil aviation after the Covid pandemic, Gol was left immersed in the debts it had accumulated during the health crisis and was suffering from a significant decrease in the value of its shares. The company ended 2023 with debts amounting to BRL 20 billion (around USD 4 billion). The firm’s net worth was down by more than BRL 23 billion, according to Gol’s own measurements.
Latam’s Chapter 11 debt restructuring was successful, and Gol’s is also quite viable, say sector analysts. A New York bankruptcy court has already authorized a loan of USD 950 million in the “debtor in possession” modality, requested as part of the recovery. Also, it has ordered Latam to explain what Gol calls predatory tactics, with claims that the company attempted to either poach or interfere with Boeing 737 aircraft lessors that do business with Gol.
However, while the outlook is not catastrophic, ensuring the sustainability of an airline is difficult even in the world’s largest economies, where aviation markets are also concentrated and dependent on government subsidies. Still, Brazil adds extra challenges, with no prospect of major changes.
“The airline sector has been living in more or less the same way for a long time, and the problems are repeating themselves. The last major technological change, with significant impacts on the cost of the sector, was 40, 50 years ago, with the arrival of the jet plane,” says Leandro Novais, speaking to The Brazilian Report. He is a professor of economic law at the Federal University of Minas Gerais and a specialist in the regulation of the airline sector.
Brazil’s Achilles heel
Foreign exchange rates have been one of the main difficulties...
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