Azul Linhas Aéreas Brasileiras (AD, São Paulo Viracopos) and Abra Group signed a non-binding Memorandum of Understanding (MoU) “aligning terms and conditions for a potential business combination" between Azul and GOL Linhas Aéreas Inteligentes (G3, São Paulo Congonhas).

If the merger proceeds, Azul and GOL will maintain separate operations and their respective operating certificates while being listed under a single corporate entity. Other areas may be consolidated, although specifics were not disclosed.

The MoU formalises the shared plan for the combined entity's governance structure, Azul said in a stock market notice. The combined entity would have a single class of shares listed in Brazil’s Novo Mercado and the New York Stock Exchange (NYSE). Its Board of Directors would consist of nine members, equally distributed between Abra Group, Azul shareholders, and independent directors. The chair would be designated by Abra, and the chief executive would be appointed by Azul during the first three years following the merger.

The two parties will continue to negotiate a proposed share exchange ratio and other transaction details. GOL is not a signatory to the MoU but has been informed of the agreement by Abra Group Limited, its parent company and largest secured creditor.

Azul’s chief executive, John Rodgerson, told Reuters that the combined carrier would be “a national champion” in Brazil. He discarded potential competition concerns, saying other countries have airlines and entities with dominant shares in their home markets, such as LATAM Airlines Group, Lufthansa Group, and IAG International Airlines Group. “So these other countries understand the importance of having a strong airline that can grow. Especially a strong company which buys local aircraft,” he said. Azul operates a fleet which includes forty-five E195s and thirty-one E195-E2s, and has forty-four E195-E2s on order from Embraer.

The business combination is subject to the consummation of GOL’s Chapter 11 reorganisation plan. The company updated its Chapter 11 five-year financial restructuring plan today and expects to emerge from its bankruptcy process in May.

“The agreement has no impact on GOL’s strategy, conduct of business or day-to-day operations. The Company remains focused on completing the remaining steps in its ongoing Chapter 11 proceedings to emerge from its restructuring process as a well-capitalised, standalone company”, GOL said in a statement.

The transaction also requires approval from Brazil’s antitrust authority (Conselho Administrativo de Defesa Econômica - CADE). The combined entity would control almost 62% of the Brazilian domestic market by capacity.

GOL has a fleet of 138 aircraft, all manufactured by Boeing and consisting of B737-700, B737-800, B737-800(BCF), and B737-8 models. Meanwhile, Azul and its subsidiary Azul Conecta operate a diverse fleet that includes 211 Cessna Aircraft Company, ATR - Avions de Transport Régional, Airbus, Embraer, and Boeing aircraft.

UK-registered Abra Group Limited is the owner of GOL, avianca airlines (AV, Bogotá) and Wamos Air (EB, Madrid Barajas).