Azul AZUL has entered into a non-binding agreement with Avianca Brasil to acquire a few of its assets for $105 million. Notably, Avianca Brasil is operating under bankruptcy court protection on fears of aircraft repossession following outstanding payments to aircraft lessors.
Per the Brazilian Bankruptcy and Judicial Reorganization Law, the acquired assets will be transferred to a new entity (NewCo), which is devoid of all debts and liabilities. The NewCo would include the assets that Azul chooses, such as Avianca Brasil's operating certificate, 70 pair of slots and nearly 30 Airbus A320 aircraft. Azul currently utilizes two Airbus A320 planes. Previously, the aircraft was used by Avianca Brasil until repossession last December.
Azul believes, the entire procedure could take up to three months for completion. Moreover, the agreement is subject to numerous conditions such as due diligence, regulatory, creditors’ approvals etc. Meanwhile, the carrier did not reveal ways by which it plans to take over the leases.
We expect investors to stay focused on further updates by the carrier on this issue.
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Zacks Rank & Other Key Picks
Azul flaunts a Zacks Rank #1 (Strong Buy). Some other top-ranked stocks in the same space are China Eastern Airlines Corporation Ltd. CEA, China Southern Airlines Company Limited ZNH and SkyWest, Inc. SKYW, each sporting a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of China Eastern Airlines and China Southern Airlines have rallied more than 14% and 27%, respectively, on a year-to-date basis. Meanwhile, the SkyWest stock boasts an impressive earnings history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 16.9%.
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