Azul Linhas Aéreas Brasileiras (AD, São Paulo Viracopos) has announced it has signed a non-binding agreement with OceanAir Linhas Aéreas S.A t/a Avianca Brasil over the purchase of select assets including its Air Operator's Certificate (AOC), 70 airport slot pairs, and approximately thirty A320 Family aircraft.

"As provided by the Brazilian Bankruptcy and Judicial Reorganization Law, the assets will be transferred to a new entity free and clear of all debts and liabilities ("NewCo"). The proposed NewCo solely includes certain assets selected by Azul," the carrier said in a stock market filing.

Azul will pay around USD105 million for the assets which, according to Reuters, include all of Avianca Brasil's São Paulo Congonhas and Rio de Janeiro Santos Dumont slots and about half of the ones it controls at São Paulo Guarulhos. The transaction is subject to a number of conditions precedent, including due diligence, regulatory and creditors approvals, and the conclusion of Avianca Brazil's judicial reorganization. Azul expects the deal to close within the next three months.

Cash-strapped Avianca Brasil filed for judicial recovery (Recuperação Judicial), a procedure akin to the US Chapter 11 bankruptcy, in the 1st São Paulo Commercial Court on December 11, 2018. Since then, the airline has been trying to secure external capital. In early February, a São Paulo bankruptcy court extended the deadline for the finalization of a deal with creditors whose dues, exclusive of lessors, are estimated at BRL500+ million reais (USD119.4 million).

It is recalled that as part of its recovery, Avianca Brasil set up an isolated business unit (Unidade Produtiva Isolada - UPI) named Life Air to contain its slots and leased aircraft while its debts/toxic assets are to be left behind with the current company. In February, Brazilian media cited court documents linking US-based private equity fund Elliott Management to a 49% stake in Life Air. According to O Estado de S.Paulo, talks have dragged on with no deal signed ahead of the Azul announcement.

On Thursday last week, Avianca Brasil confirmed it had paid salaries for only a part of its workforce. A statement to Globo news said that "about 1,400 employees" had been paid their February wages with those with lower remuneration having been prioritized. Unions have given management until March 13 to pay off its remaining staff.

According to the ch-aviation fleets module, Avianca Brasil currently operates four A318-100s, four A319-100s (including one stored), twenty-five A320-200s (four stored), seven A320-200neo, four A330-200s (two stored), and one A330-200F. As previously reported, lessors have been barred from recovering their assets by a series of controversial higher court rulings.

If the Azul transaction is finalised, it will the hybrid carrier resuming A320ceo operations. Currently, its fleet includes twenty-five A320neo, seven A330-200s, thirty-three ATR72-600s, two B737-400(F)s, eight E190s, and fifty-two E195s.