By Brazil Stock Guide –Azul S.A. (B3: AZUL4; OTC: AZULQ) closed the third quarter of 2025 with a net loss of R$644 million, despite delivering a strongest operating performances. The airline reported record EBITDA, expanding margins, higher aircraft utilization and solid revenue growth, but the heavy financial costs tied to its debt structure and restructuring process continued to outweigh the operational momentum. Yet Azul says the quarter reinforces a clear duality: an operating engine running at full capacity while financial pressures remain high until its Chapter 11 exit is finalized.
Operating Engine Shows Record Strength
Net revenue rose 11.8% to R$5.7 billion, the highest for any third quarter, driven by strong demand, a more efficient network and a 7.1% increase in capacity. Passenger traffic grew 9.7%, pushing load factor to a record 84.6%. RASK reached R$44.76 centavos, the highest third-quarter level ever recorded by the airline.
Operational profitability also hit historical highs. EBITDA climbed 20.2% year over year to R$1.99 billion, with an EBITDA margin of 34.6%, while operating profit reached R$1.27 billion, up 23.7%. Azul also increased daily aircraft utilization to 11.9 hours, and its ancillary units—Azul Fidelidade, Azul Viagens and Azul Cargo—kept expanding at a strong pace, together accounting for nearly 30% of total EBITDA.
Financial Costs Drive Deep Quarterly Loss
Azul’s operational strength was overshadowed by R$2.83 billion in financial expenses, more than double the level seen a year earlier. These costs included R$1.205 billion in interest on loans and financings, R$665 million tied to IFRS 16 lease interest, R$473 million in amortized debt costs and R$58 million from credit-card receivable advances.
A 2.5% appreciation of the real generated R$918.7 million in FX gains, but the relief was far from enough to offset the heavy financial load. The company noted that, excluding interest associated with debt that will be converted into equity when it exits Chapter 11, the quarter’s financial expense would have been closer to R$800 million—still high, but significantly lower than the reported number and more aligned with the airline’s operating reality.
Liquidity Strengthens While Restructuring Progresses
Azul ended the quarter with R$3.4 billion in immediate liquidity, up 38% from a year earlier, supported by disciplined working-capital management and the deliberate reduction of credit-card receivable advances. Total liquidity, including maintenance reserves and deposits, reached R$8.8 billion, and the airline held more than R$1.6 billion in credit-card receivables that can be accessed at low cost due to Brazil’s post-flight settlement structure.
During the quarter, Azul accessed US$1.1 billion of its US$1.6 billion DIP financing package, using US$910 million to settle priority and convertible debt and adding US$200 million in incremental cash. The airline said the financing, while expensive, was essential to provide stability and preserve operational continuity during the restructuring process.
On the legal front, Azul reached a global agreement with the Unsecured Creditors Committee, secured court approval for its revised disclosure statement and began soliciting creditor votes—one of the final steps before plan confirmation. The board approved equity investment agreements with American Airlines and United Airlines, totaling US$200 million in new capital at emergence, while the court signed off on a US$650 million backstop, ensuring the company’s capitalization upon exit.
Toward a Cleaner Balance Sheet
Azul maintains that it is on track to emerge from Chapter 11 by February 2026, with leverage projected to fall from 5.1x net debt/EBITDA to 2.5x once debt conversions and lease adjustments are executed. Management says the combination of strong passenger demand, improving cost dynamics and rapidly growing ancillary units will support a more predictable cash-generation profile after the restructuring.
Leave a Reply