Azul and Gol Announce Major New Partnership — Could a Merger be Next?

Skift Take

This huge cooperation agreement between two of Brazil’s three largest airlines will do little to quell speculation that a merger between Azul and Gol could be on the horizon.

Two of the biggest players in Brazilian aviation have agreed to a major new commercial partnership. On Friday, Azul and Gol said they will begin a cooperation agreement — one which looks set to shake up the country’s air market.

The codeshare deal connects both of the airline’s domestic flight networks. It covers all routes within Brazil that are operated by one of the two companies, but not the other. 

The scale of the deal is huge. Alongside Latam, Azul and Gol comprise the three largest airlines in Brazil. The new partners operate around 1,500 daily departures — the vast majority of which are domestic routes. The companies said the agreement will create more than 2,700 flight options with just one connection. 

Abhi Shah, president of Azul, said the two airlines had “significant non-overlap service offerings,” and that the move would “bring enormous benefits” to customers. 

The partnership also means changes to the airlines’ respective frequent flier programs. Azul Fidelidade and Smiles members will soon be able to earn points or miles within their preferred program when taking one of the new codeshare flights. 

Azul confirmed to Skift that the new codeshares will begin from the end of June. 

Celso Ferrer, CEO of Gol sought to contextualize the deal, adding that the airline already has more than 60 commercial agreements with global airline partners including American Airlines and Air France-KLM. He said Gol was “eager to extend these benefits within Brazil.”

Merger Speculation Intensifies

As reported by Airline Weekly, the South American duo have recently been subject to heightened industry chatter about a potential merger. When asked earlier this month about the likelihood of a more formal tie-up, Azul CEO John Rodgerson simply said: “We’re big fans of consolidation.”

In April, Bloomberg said talks between the two companies had “gained momentum,” with Azul reportedly working with Citigroup and Guggenheim Partners to explore a possible bid.

Given their dominant positions in the Brazilian airline sector, any merger would require the approval of regulators.

Both Gol and Azul are currently enjoying favorable market conditions, helped by the fact that just three main carriers serve Brazil’s population of more than 215 million people. Gol and Azul also have portfolios of profitable side businesses, including loyalty programs, cargo handling, maintenance shops, and tour packages. 

But it’s not been entirely blue skies. Gol is still restructuring its financial obligations in bankruptcy, as Azul did outside of bankruptcy.

Airline Weekly reports that Gol has sufficient cash to continue flying without disruption thanks to support from its parent company Abra, which also owns Colombia’s national carrier Avianca. 

Watch Azul CEO, John Rodgerson Speak at the Skift Aviation Forum:

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