Azul-Gol Merger: Can a Mega Airline Rescue Brazil’s Battered Aviation Industry?

Let’s cut to the chase: Brazil’s aviation sector is in rough shape.

Azul and Gol, two of its biggest airlines, have been bleeding money since the pandemic. Gol filed for Chapter 11 bankruptcy in early 2024, and Azul has been restructuring its debt with bondholders and suppliers for months.

Both are grappling with a weak Brazilian real, which makes dollar-denominated expenses like jet fuel and aircraft leases brutally expensive.

I’ve seen this story before—high costs, currency woes, and thin profit margins squeezing airlines into corners.

But LATAM Brasil, the current market leader, isn’t exactly thriving either. All three major carriers are stuck in a cycle of restructuring, which makes the Azul-Gol merger feel less like a power play and more like a survival tactic.

Many are calling it a “necessary evil”, and I’m inclined to agree. If these two don’t merge, there’s a real risk one (or both) could collapse, leaving LATAM as the sole dominant player.

That’s hardly a win for the competition.

Why the Brazilian Government Is Backing the Deal

Politics and aviation are tangled here.

President Lula’s administration has openly supported the merger, with Ports and Airports Minister Silvio Costa Filho arguing that letting the airlines fail would be far worse for the economy.

The government wants a “national champion” that can buy locally made Embraer jets and compete globally—a vision Azul’s CEO, John Rodgerson, has echoed.

But let’s not kid ourselves: regulatory approval isn’t a given.

Brazil’s antitrust watchdog, CADE, has a history of skepticism toward mergers that reduce competition. In 2019, they blocked Avianca Brasil’s asset sales to rivals, fearing market concentration.

This time, though, the calculus feels different. Gol’s bankruptcy adds urgency. CADE’s experts have hinted that blocking the merger could shrink the domestic market further, as Azul has already started trimming routes.

My bet?

CADE will greenlight the deal with concessions—like forcing the merged airline to surrender slots at congested airports like Congonhas in São Paulo.

The Overlap Illusion: Why Routes Matter More Than Market Share

Azul and Gol claim their networks are 90% complementary, with minimal overlap.

If true, that’s a game-changer. Imagine Azul’s regional jets connecting smaller cities while Gol’s Boeing 737s handle trunk routes. Together, they’d serve over 200 destinations in Brazil, far outpacing LATAM Brasil’s 39% market share.

But here’s the catch: antitrust regulators don’t care about national market share. They dissect route-by-route dominance.

Take the Rio-São Paulo corridor, one of the busiest in the world. If the merged entity controls too many slots there, CADE could force them to sell some to LATAM or a new entrant.

It’s a delicate dance: the airlines need enough scale to survive, but not so much that they strangle competition.

The LATAM Factor: Friend or Foe in This Saga?

LATAM Brasil is the elephant in the room.

While Azul and Gol merge, LATAM’s parent company—already a regional giant—could exploit the chaos to poach routes or passengers.

But LATAM’s CEO, Roberto Alvo, has warned that any consolidation should face “strict scrutiny”. Translation: they’ll lobby hard for CADE to impose tough conditions on the deal.

Ironically, LATAM might benefit short-term. If Azul and Gol are distracted by merger logistics, LATAM could ramp up its own network. But long-term, a merged Azul-Gol would have a fleet of 327 aircraft, dwarfing LATAM’s 163 planes in Brazil.

For consumers, this could mean better connectivity but also fewer choices—and potentially higher fares if competition dwindles.

The Synergy Question: Can Two Struggling Airlines Become One Strong One?

Mergers often promise synergies, but delivering them is another story. Azul and Gol have wildly different fleets: Azul flies Embraer, Airbus, and even Cessna Caravans, while Gol is all-Boeing.

Combining these under one umbrella could reduce maintenance costs and improve scheduling efficiency. The airlines also plan to merge financial and reservation systems while keeping their brands separate.

But debt remains a hurdle. The merged entity’s net leverage must match Gol’s post-bankruptcy levels, which means Azul’s cleaner balance sheet could be diluted.

Investors seem optimistic—both airlines’ shares jumped after the merger announcement —but I’m cautious. Integration risks are massive, especially in a country with infrastructure bottlenecks and volatile demand.

What This Means for Brazil’s Aviation Future

If the merger goes through, Brazil could end up with two mega-carriers: Azul-Gol and LATAM. That’s not ideal for competition, but it might be the only way to stabilize a sector battered by years of crisis.

Smaller cities could gain better connectivity, as Azul’s regional focus complements Gol’s mainline operations. Internationally, the combined airline might challenge LATAM on routes to the U.S. and Europe.

Still, I can’t ignore the risks.

Reduced competition often leads to higher prices, and CADE’s remedies might not go far enough to prevent dominance on key routes. Plus, the merger’s success hinges on flawless execution—something rare in airline marriages.

The Bottom Line: A High-Stakes Gamble

Brazil’s aviation sector is at a crossroads. The Azul-Gol merger isn’t perfect, but it’s arguably the least bad option left.

With government backing, cautious regulator support, and a desperate need for stability, this deal has a fighting chance.

But if the merged airline stumbles—or if LATAM outmaneuvers them—the turbulence could get worse before it gets better.