Azul announces financing of up to 2.0 billion Brazilian reais to buy fuel for domestic flights
Key Facts
Azul said on October 24, 2026, that it had entered into a financing arrangement of up to 2.0 billion Brazilian reais, with the union covering the credit risk through the Guarantee Funds and Guarantees Management Agency (ABGF), using resources from the Export Guarantee Fund (FGE). The proceeds are earmarked exclusively to pay for aviation fuel purchased to operate scheduled domestic flights, according to a filing by the company with Brazil’s securities regulator. The arrangement amounts to a government guarantee of credit risk within a financing transaction, not a direct cash transfer to the company. Azul said the transaction is part of its restructuring plan and long-term strategy. It added that it strengthens liquidity and provides additional financial flexibility amid fuel-price volatility.
The financing comes as fuel costs have weighed on the company’s finances. The average cost of aviation fuel per liter rose to 6.25 reais in the second quarter of 2026, from 3.86 reais in the same period of 2025, an annual increase of 61.8%, according to Azul’s quarterly results. Jet fuel expenses also rose 41.2% to 1,960.8 million reais in the second quarter. The company attributed the increase mainly to the higher price of fuel per liter, while lower operating capacity and a 2.4% improvement in fuel efficiency per ASK partially offset the impact. These figures explain why the new financing is earmarked specifically for fuel, a cost item that has risen even as the company cut operations.
The company linked higher unit costs to increased fuel costs and lower capacity, which reduced the activity over which costs are spread. Meanwhile, operating revenue reached a record 5.0 billion reais for the second quarter, despite the decline in capacity. The company said higher fares helped it contend with the sharp increase in fuel prices. However, earnings before interest, taxes, depreciation and amortization fell 55.4% to 510.1 million reais compared with the second quarter of 2025, underscoring the continued impact of cost pressures on results.
Azul ended the second quarter of 2026 with immediate liquidity of 3.7 billion reais, equivalent to 16.6% of revenue over the previous twelve months, according to its results. In an August results filing, the company said the government had recently approved long-term financing of up to 4.6 billion reais on terms it described as attractive, providing financial flexibility during the transition year. The financing announced in October adds to an earlier government loan the company obtained in June through Banco do Brasil, worth 330 million reais, to support working capital. Principal and interest on that loan are due as a single payment in December 2026. The arrangements reflect the company’s reliance on multiple financing instruments as it restructures, with the new transaction earmarked for domestic fuel expenses.
Azul linked its rising costs to the global energy market, saying developments related to the conflict in the Strait of Hormuz contributed to the rise in Brent crude prices in the first half of 2026 and directly affected fuel costs. The average cost of fuel per liter rose to 5.03 reais in the first half, from 4.12 reais in the corresponding period of 2025, according to a filing with the U.S. Securities and Exchange Commission. This context underscores the importance of restricting use of the new financing to fuel, while the company’s financial flexibility remains tied to its ability to manage operating and financing costs together. Chief Financial Officer Antonio Carlos Garcia told Reuters on October 20 that Azul expects to end 2026 with capacity about 5% lower than the previous year. He added that the company’s recovery timeline could be delayed by a year or more if fuel prices remain high.