• In June, Azul and Latam, two of the leading air companies in Brazil, signed a codeshare agreement to connect routes in their respective domestic networks;
• “We understand that the COVID-19 crisis requires innovative responses to help kick-start the economies of the region and today’s announcement is part of our contribution to this effort,” stated Jerome Cadier, CEO of Latam Airlines Brazil, at the occasion;
• Now, the two companies could be coming closer to a merger, since Azul is struggling to raise fund to tackle the devastating effects of the Covid-19 pandemic;
• Latam and Gol, on the other hand, managed to raise a few billion dollars through loans and other types of agreements to face the difficulties brought by the crisis.

After signing a codeshare agreement with Latam to connect routes in their respective domestic networks in Brazil, Azul could be coming closer to a merger with Latam. The information is from a column on the Brazilian news outlet Estadão.

For industry experts heard by the newspaper, the lack of government support has pushed companies towards market solutions. “The hesitation and the delay in the release of BNDES (National Bank for Economic and Social Development) funds show that the government doesn’t want to bring the protagonism of this rescue process of the airlines to itself,” a source close to the air sector told the news outlet.

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The volume of resources for each airline would be around BRL 1.2 billion, and BNDES would contribute with only 60%, with the remainder coming from banks and the capital market, where funding for the airline sector it would be more difficult.

“The government has already opened the door last year for the entry of foreign companies and Latam is mostly a foreign company,” he said. According to Estadão’s source, the codeshare agreement between Azul and Latam is a sign of an eventual future agreement, which could be well regarded by the government.

Azul’s first-quarter earnings showed that the company had BRL 4.8 billion in loans and debt contracted with the issuance of debentures. In liabilities related to leasing, the sum was around BRL 15.8 billion until March 31. Azul will release its balance sheet for the second quarter on August 13.

None of the companies officially confirmed the information. The e-Investidor news portal, however, states that the presidents of the two companies provided conflicting information on the topic, which may reveal that there is, indeed, a negotiation in progress. Two weeks ago, Azul president John Rodgerson denied the possibility of a future merger with Latam, while Latam Brasil president Jerome Cadier said in June in an interview with CNN Brasil that a merger could take place in an unspecified future.