Azul shares and Gol’s rose dramatically on Thursday following an announcement about a merger proposal between two Brazilian Airlines.
Azul shares rose more than 4% while Gol stocks climbed by around 8%.
Investors are viewed as confident in the merger proposed by the Brazilian Airlines.
Deal between Azul and Gol
Abra, the company that owns Gol and Avianca said it had entered into an agreement with Azul Airlines. This caused stock prices to increase.
This memorandum describes the initial conversations that are being held to merge two companies.
According to the National Civil Aviation Agency, if this merger is approved, it will transform the Brazilian aviation industry. The new airline would have around 60% control of the Brazilian domestic market. Latam currently only has 40%.
Gol stressed in a letter to investors that this agreement was only the start of the discussion to assess the viability of any potential deal.
Both airlines reaffirmed their commitment during the negotiations to preserve their unique names as well as their brands, operational certificates and their own distinct identities.
Azul stated in its investor conference, that the combination of these two companies would increase choice for customers and lower costs. This would allow them to expand their business while providing better service throughout.
The company stated that such a deal would lead to a newly formed entity which would expand and develop air travel throughout Brazil, with a fleet that is flexible but focused on providing the best service.
Certain conditions may apply to the merger.
The agreement of intention states that the completion of Gol’s Chapter 11 proceeding, along with other settlement negotiations and clearances, is required for the merger to be successful.
The financial situation of both airlines has been challenging
Azul is negotiating with its creditors to settle some debts, while also seeking to raise additional funds to strengthen its position.
Gol, on the other hand, filed for Chapter 11 protection in the United States. This is a legal procedure that allows companies to continue operating while reorganizing. In the United States, the process is very similar to that of judicial recovery.
Gol’s goal in terms of stakeholder is to overcome critical challenges during the Chapter 11 process. Gol appears to be attempting to reposition itself as an independent and financial solid corporation that is more financially stable, sustainable, and independent.
Market reaction to the Azul-Gol Deal
Local media reports g1 that the initial response of investors was overwhelmingly positive. This indicates a desire to consolidate the high-pressure Brazilian aviation industry.
The impending merger is seen by industry watchers as an important step in developing a sustainable airline that can weather the storm of economic hardships caused by the Pandemic.
If the alliance is successful, then it could encompass the advantages and disadvantages of future rivalry in aviation.
The authorities are likely to exercise regulatory authority during merger talks, since they will be assessing the effects of a massive combination on the market and consumer choices.
The merger could lead to a major shift in Brazilian aviation, as it would result in better service, wider networks and a more competitive position with international airlines.
Brazil’s economy exceeds expectations
Brazil’s economy grew in November. Official data revealed that the activity was slightly above market expectations.
IBC-Br, an important leading indicator for GDP, has increased seasonally by 0.1% since October.
The surprising growth of Brazil’s economic activity in spite of tight central bank control is a result of ongoing changes to monetary policies.
The IBC-Br Index increased 4.1% on a monthly basis (not seasonally adjusted) compared with the same period in 2022. This indicates a good overall performance.
In addition, over the last twelve months the index has shown a steady growth of 3,6%.
This data strongly suggests that Brazil’s economy is recovering at full speed.
The Finance Minister Fernando Haddad explained this by declaring a birth of new hope, stating that Latin America’s largest economy could catch up with the European state by 3,6% by 2024.
The information in this post Azul and Gol stock surges on possible merger talks: What investors should know could be updated as new developments unfold.
