Azul Linhas Aéreas Brasileiras (AD, São Paulo Viracopos) has managed to clinch agreements with lessors that represent more than 90% of its leasing obligations, deals that will give them equity and tradeable notes in exchange for reduced payments, the airline announced late on March 5.

The agreements, subject to conditions and corporate approvals, “represent a significant part of a comprehensive plan designed to strengthen Azul’s cash generation and improve its capital structure,” the carrier said, pointing to what it called “a reset balance sheet.”

Under the deals, “lessors will reduce Azul’s lease payments to eliminate Covid-related deferrals as well as the gap between Azul’s contractual lease rates and agreed-on current market rates. In exchange, lessors will receive a tradeable note maturing in 2030 and equity priced in a way to reflect Azul’s new cash generation, improved capital structure, and reduced credit risk,” the airline explained.

It opted not to provide further details of the equity pricing or to name the lessors involved.

“Lessors represent 80% of our nominal gross debt,” Alex Malfitani, Azul’s CFO, said in the statement. “The leasing community has recognised that supporting Azul is an intelligent, revenue-maximising business decision, yet we are still honoured and grateful for their valuable support.”

He clarified that “no aircraft have left the fleet throughout this negotiation, and in fact our partners have delivered 12 additional new aircraft to us over the past five months,” and he added that negotiations continue with lessors and other stakeholders including manufacturers.

In February, the O Estado de Sao Paulo daily reported that Azul had BRL4.5 billion reais (USD864 million) in liabilities due in 2023, including BRL3.8 billion (USD732 million) to lessors and BRL700 million (USD135 million) to financial creditors. The amount due to lessors includes BRL600 million (USD116 million) in obligations deferred during the Covid-19 pandemic.

Azul owns just 13 of its fleet of 172 aircraft, according to the ch-aviation fleets module - seven E195ARs, two E195-E2s, three ATR72-600s, and one A350-900. The remainder of the fleet, namely forty-six A320-200neo, six A321-200NX(LR)s, six A330-200s, four A330-900neo, thirty-seven ATR72-600s, two B737-400(F)s, at least forty-one E195ARs, and thirteen E195-E2s, are leased from 20 lessors.