Brazil's Azul sees longer recovery as fuel costs squeeze margins after Chapter 11
AZUL•Azul expects its recovery to take longer than previously hoped as high jet fuel prices squeeze margins. It expects 2026 capacity to be about 5% below a year earlier and said the recovery could slip by a year or more if fuel prices remain elevated.
1. Cautious recovery plan
Azul CFO Antonio Carlos Garcia said the airline expects a later recovery and is sticking to cautious growth. Azul expects to end 2026 with capacity down about 5% year over year, and the timeline could slip by a year or more if fuel prices stay elevated.
2. Fuel and capacity
Azul cut second-quarter capacity by more than 10% year over year after the fuel-price shock, with modest growth expected to resume from the fourth quarter. The airline is restoring some frequencies and returning grounded aircraft to service, while passing on 60% to 65% of jet fuel price increases to customers through fares.
3. Debt and cash flow
Azul emerged from Chapter 11 in February after restructuring its balance sheet and said in August that total debt had fallen to 21.4 billion reais ($4.25 billion). Garcia said the airline was getting closer to positive operational free cash flow, though restructuring-related payments continued to hold back cash generation. Azul is also relying more on its loyalty program, travel services, cargo and maintenance operations.
