Brazil Approves US$2.5 Billion Credit Line For Airlines

‍BRASÍLIA — Brazil’s National Civil Aviation Fund Management Committee approved the release of a BRL 13.56 billion (US$2.5 billion) credit package - divided into an emergency working capital fund and long-term investment loans - for Azul (AD), GOL (G3), LATAM (LA), and Abaeté (E4).

Coping with the jet fuel price increase

The first allocation, in the amount of BRL 8 billion (US$1.47 billion), is aimed at mitigating the impact of rising jet fuel prices, the Ministry of Ports and Airports reported to the aviacionline.com news outlet.

Abaeté can access up to BRL 80 million (US$14.7 million) under the first allocation, and the other carriers can access loans of up to BRL 2.5 billion (US$461 million) each.

The airlines will have a repayment window of up to 60 months at a 4% annual interest rate and a 12-month grace period. 

As one of the loan conditions, companies agreed to a temporary ban on the distribution of dividends to shareholders until the loan is fully repaid.

Expansion and modernization projects

The second loan tranche in the amount of BRL 5.56 billion (US$1.02 billion) is dedicated to expansion and modernization projects.

The major Brazilian airlines - Azul (AD), GOL (G3), and LATAM (LA) - can access loans of up to BRL 1.8 billion (US$332 million) each.

The funds must be directed towards the purchase of locally produced sustainable aviation fuel (SAF), fleet expansion, pre-delivery payments, and the contracting of engine maintenance services.

The annual interest rates vary depending on the investment aim:

• Ecological fuel and logistics infrastructure projects - 6.5%,
• Aeronautical maintenance - 7%,
• Fleet acquisitions - 7.5%.

Counter-obligation 

The airlines that are willing to take a loan under the new credit line are obligated to increase their flight offerings in Legal Amazon and Northeast by 15% compared to last year, or guarantee that at least 17.5% of their annual departures are in those regions.

Carriers will have a 24-month deadline to comply with the set requirements and will have to maintain it for at least one year.

Final approval by the bank

The final approval for the release of funds is subject to financial analysis and approval by the National Economic and Social Development Bank.

The state-owned lender will assess a credit risk, carriers’ payment capacity, and the submitted guarantee prior to signing the loan contracts.