Azul Linhas Aéreas (Azul), Brazil’s third-largest airline, recently made headlines by filing for Chapter 11 bankruptcy protection in a New York court on May 28, 2025. The company has been facing significant financial challenges, with reported debts soaring to $5.56 billion. This move by Azul echoes similar actions taken by local competitors GOL and LATAM in recent years, who also sought the protection of US bankruptcy courts to restructure their finances.

Pilotcenter.net News reports that the bankruptcy filing comes after months of negotiations with creditors and investors, with commitments from major airlines like United Airlines and American Airlines to provide financial support once Azul completes its restructuring. The airline's debt has been on the rise due to various factors such as currency fluctuations, increasing US interest rates, and operational disruptions stemming from global supply chain delays.

Despite Azul's efforts to reduce its debt through a restructuring plan earlier in 2025, which involved swapping equity with aircraft lessors and bondholders to eliminate $1.6 billion in debt, the airline found it necessary to seek Chapter 11 protection. This legal move will give Azul some breathing room from creditors as it works on turning its financial situation around.

As part of the bankruptcy proceedings, creditors have agreed to convert a portion of the debt into preferred shares and extend maturities, while a substantial capital infusion aims to stabilize operations. Bondholders and lessors are expected to have a significant stake in the airline post-restructuring, leading to existing shareholders having diluted ownership.

One of the significant challenges Azul has faced is the grounding of several aircraft powered by Pratt & Whitney engines, resulting in maintenance issues and a lack of spare parts. The airline is looking to modernize its fleet by introducing more fuel-efficient aircraft to address these challenges.

Azul is optimistic about the future, with plans to minimize disruptions to its operations during the restructuring process. CEO John Rodgerson expressed confidence in the company's ability to emerge as an industry leader, stating that the restructuring is a strategic decision to build a strong and resilient airline that will continue to provide exceptional service to customers and value to stakeholders.