Azul Linhas Aéreas (Azul) is contemplating a takeover of Gol Linhas Aéreas Inteligentes (Gol) after Gol filed for bankruptcy in January. Both Brazilian-based budget carriers have experienced difficult economic setbacks since the initial outbreak of the COVID-19 pandemic. 

Azul is currently working with Citigroup and Guggenheim Partners to gather financing for a proposal to Gol stakeholders. Although Azul has yet to fully commit to the purchase, the intent would be to operate and own all Gol's assets and flights. Gol declared Chapter 11 bankruptcy in January.

Azul was founded in 2008 by JetBlue founder David Neeleman, who intended to create a large domestic airline in Brazil. Embraer, a Brazilian aerospace manufacturing company, manufactured most of the jets in Azul's fleet. This partnership and growth of air travel in Brazil has seen Azul become South America's third-largest airline after LATAM and Gol.

Like Azul, Gol was founded in the early 2000s and has become a large player in Brazil's aviation sector. Although the company has become the second-largest airliner in South America, the company filed for Chapter 11 bankruptcy earlier this year. Due to a collapse in financing, the company is an estimated $4 billion in debt. This financial mismanagement results from around 140 leasing contracts for Boeing 737 aircraft. Boeing and Embraer have recently dominated the production and servicing of the Latin American aircraft market.

The potential bid by Azul is more complicated than a simple merger. Given the size of both companies, the acquisition would need approval from the Conselho Administrativo de Defesa Econômica (CADE), the Brazilian fair market economic regulator. Monopoly concerns around airlines have been frequent in Brazil and the US, with JetBlue and Spirit Airlines finding difficulties in a potential acquisition.

However, given the potential for a sale, both shares in Gol and Azul have risen in the stock market by over 5 percent. Both airlines could remain out of bankruptcy between 2020-2023 due to refinancing arrangements set out by their creditors and investment groups. In an official statement by Azul, they confirmed that no official agreements have been reached and that any acquisitions of Gol are not under consideration at the moment. Azul wants to explore any partnerships before arranging a bid and navigating Brazil's regulations.

Domestic tourism has slowed slightly in Brazil over the past few years. Many domestic tourism efforts have failed to maintain the same traffic levels after large-scale internal investments between the 2014 FIFA World Cup and the 2016 Summer Olympic Games in Rio De Janeiro. This downturn has hurt domestic flight routes.