Bankrupt airline stock tanks on cancelled flight fears

On May 28, Azul Airlines (AZUL) announced that it was filing for Chapter 11 protection after months of rumors that a bankruptcy was the only way Brazil’s third-largest airline could get out of its growing debt.

Earlier efforts to get lenders to wipe out $550 million in loans in exchange for equity and raise additional funding through bondholders proved to be insufficient for debt of over BRL 30.5 billion (approximately $5.35 billion USD) that began accumulating after the travel disruption of the Covid pandemic; the resumed travel was, for many airlines, not enough to get out of the hole caused by many months of cancellations.

The restructuring plan that Azul submitted in U.S. bankruptcy court includes a commitment to secure $1.6 billion in financing and eliminate $2 billion in debt while also receiving $950 million in equity investment upon emergence.

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Here is how much Azul shares have fallen upon bankruptcy news

When Azul formally announced the news on Tuesday morning of São Paulo time, shares of the airline dropped by over 40%. Currently at $0.5 USD, shares have fallen by more than 71% since the start of 2025.

“These Agreements mark a significant step forward in the transformation of our business – one that enables us to emerge as an industry leader in the main aspects of our business,” Azul CEO John Rodgerson said in a statement on the bankruptcy. “With a collaborative approach and the support of our stakeholders, we have made a strategic decision to pursue a voluntary financial restructuring as a proactive move to optimize our capital structure – which was burdened by the COVID-19 pandemic, macroeconomic headwinds, and aviation supply chain issues.”

Azul is the third-largest airline in Brazil.

Image source: Shutterstock

Azul to continue operations as usual but fears persist

While Rodgerson explicitly said that the airline “continues to fly today, tomorrow, and into the future” and that service would not be interrupted, news of a bankruptcy always brings about travel disruption fears from travelers.

During peak travel periods, Azul runs 1,000 flights per day to both 160 domestic destinations within the territorially large Brazil and many nearby and more faraway countries. Some of Azul’s international destinations include Argentina, Paraguay, Curaçao, and France, as well as Orlando and Fort Lauderdale in the U.S.

Those two cities were Azul’s first international destinations after JetBlue Airways (JBLU) founder David Neeleman founded it as a new airline in Brazil in 2008. The carrier straddles the line between full-service and low-cost and maintains codeshare partnerships with United Airlines (UAL) and TAP Air Portugal.

More on travel and bankruptcy:

This spring, Azul discontinued routes to Fort Lauderdale from the Brazilian cities of Belo Horizonte and Recife, although the move came as part of a wider network rearrangement decided last year based on demand, rather than anything having to do with the bankruptcy. As of now, Azul’s leadership is stressing that travelers will not feel the impact of its need to restructure as it continues to run flights on the same schedule.

Azul’s bankruptcy announcement is also the latest in a series of similar ones from Latin American airlines in particular; fellow Brazilian carriers GOL (GOL) and LATAM (LTM) , as well as Colombia’s flagship Avianca (AVH) , have all sought bankruptcy protection since the Covid pandemic over similar problems on the market.