US Court Approves Azul Airlines Debt Restructuring Plan for 2026 Exit

This article summarizes reporting by Reuters.

U.S. Court Approves Azul’s Restructuring Plan, Clearing Path for 2026 Exit

The U.S. Bankruptcy Court for the Southern District of New York has formally approved the debt restructuring plan for Brazilian carrier Azul Linhas Aéreas, marking a decisive step in the airline’s financial reorganization. According to reporting by Reuters, Judge Sean Lane issued the approval on Friday, December 12, 2025, following the airlines Chapter 11 filing earlier in May.

The court-sanctioned plan is set to eliminate approximately $2.6 billion in debt and lease obligations while injecting nearly $1 billion in fresh capital into the company. As detailed in court filings and Reuters coverage, the restructuring allows Azul to significantly deleverage its balance sheet and positions the carrier to emerge from bankruptcy protection as early as February 2026.

Major Investments from United and American Airlines

A central component of the approved plan involves substantial foreign investments. Reuters reports that both United Airlines and American Airlines have committed to investing approximately $100 million each into the reorganized carrier. Under the terms of the deal, these U.S. legacy carriers are expected to acquire equity stakes of roughly 8.5% each in Azul.

This capital injection is part of a broader $950 million financing package designed to stabilize the airline’s operations. The restructuring agreement also resolves outstanding issues with aircraft lessors, including AerCap, reducing lease obligations by approximately 28%. This reduction is critical for Azul’s strategy to modernize its fleet with more efficient Embraer E2 jets.

Equity Swap and Shareholder Dilution

The financial overhaul will fundamentally alter Azul’s ownership structure. According to the approved plan, the vast majority of the new equity will be transferred to creditors. First-lien noteholders are projected to own approximately 97% of the reorganized company, while second-lien creditors will hold roughly 3%.

Existing shareholders face significant dilution under this arrangement. Reports indicate that current equity holders who do not participate in new capital calls may see their stakes reduced to negligible levels, a common outcome in Chapter 11 reorganizations where debt is swapped for equity.

Operational Outlook and Executive Commentary

Azul’s leadership has framed the court approval as a turning point for the airline. CEO John Rodgerson emphasized that the restructuring converts financial liabilities into equity, thereby reducing annual interest expenses by an estimated $200 million.

In an interview cited by Reuters, Rodgerson highlighted the operational benefits of the deal:

“This debt comes off my balance sheet and turns into equity, so we end up in a much lighter situation.”

, John Rodgerson, CEO of Azul (via Reuters)

The approval also halts previous speculation regarding a potential merger with Gol Linhas Aéreas. Azul has opted to proceed as a standalone entity, focusing on its domestic dominance and international connectivity rather than consolidation with its local rival.

AirPro News analysis

The approval of Azul’s restructuring plan underscores a persistent trend in Latin American aviation: the reliance on U.S. Chapter 11 bankruptcy protection to resolve sovereign economic challenges. Azul follows LATAM, Avianca, and Gol in utilizing U.S. courts to reorganize. This legal venue offers a “debtor-in-possession” framework that is often more flexible than local equivalents, allowing carriers to renegotiate international contracts, specifically aircraft leases and dollar-denominated debt, while continuing normal operations at home.

For the Brazilian market, this outcome likely ensures stability. With United and American Airlines taking equity positions, Azul strengthens its ties to the massive North-America travel market. However, the near-total dilution of existing shareholders serves as a stark reminder of the financial severity required to salvage the airline after the “perfect storm” of pandemic debt, high fuel costs, and currency devaluation.

Frequently Asked Questions

Does this mean Azul is going out of business?
No. This is a financial reorganization (Chapter 11), not a liquidation. The airline continues to fly normally, and the court approval allows it to fix its balance sheet and remain in business.

When will Azul exit bankruptcy?
According to the timeline presented in court, Azul expects to formally emerge from Chapter 11 in February 2026.

How does this affect ticket holders?
Flight operations, ticket validity, and loyalty programs remain unaffected by the corporate restructuring process.

Sources

• Reuters