Azul and Gol of Brazil Obtain Credit Lines for Engine Maintenance; Stock Prices Surge

28 Dec, 2023

Azul and Gol of Brazil Obtain Credit Lines for Engine Maintenance; Stock Prices Surge

Brazilian airlines Azul and Gol have successfully obtained access to approximately $200 million each in financing, aimed at supporting their engine maintenance initiatives. This move comes as airlines worldwide grapple with significant engine supply challenges, constraining aircraft deliveries and capacity expansion, while elevating maintenance pressures and costs.

Azul announced its approval for a $200 million government-backed credit facility designated for financing engine maintenance across its Embraer and Airbus fleet, utilizing services provided by GE Celma. Meanwhile, Gol confirmed authorization to access a government credit insurance policy, securing lines of up to $209 million to facilitate engine maintenance, partnered with GE.

As a result of these developments, both companies experienced a surge of around 1% in their stock prices on Wednesday, ranking among the top gainers on Brazil's Bovespa stock index, despite overall stability in the index.

Azul's Chief Financial Officer, Alex Malfitani, emphasized the new credit facility's potential to optimize liquidity and streamline the fleet's engine maintenance procedures. Gol, primarily operating Boeing 737 aircraft, outlined its focus on maintaining CFM56-7B engines.

Earlier concerns voiced by both Azul and Gol regarding engine supply challenges were echoed by their CEOs. Azul's John Rodgerson highlighted it as a significant issue across manufacturers, while Gol's Celso Ferrer noted maintenance backlogs due to delayed Boeing deliveries.

This development follows President Luiz Inacio Lula da Silva's administration striking a deal with airlines. This pact involved Azul and Gol agreeing to cap domestic ticket prices in exchange for government initiatives, including a federal guarantee for credit operations.

Analysts from Genial Investimentos remarked positively on the impact of this government agreement, stating that the credit lines would optimize liquidity and operational efficiency for the airlines, contributing to support the local economy.