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April 20, 2024
GOL and Castlelake secured financing for a Boeing 737 MAX order

Photo: Nathan Coats via Wikimedia Commons.

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As 2024 starts, some airlines are experiencing a steep acceleration towards bitter times. January hasn’t been kind to Alaska and Spirit, for instance. And down south, Brazilian GOL faces a storm that could shake the entire South American market.

Rumors are rife while facts are scarce: Lessors are itching about unpaid fees, and the carrier started negotiations seeking better options. Like its Abra Group partner Avianca, GOL sought advice on executing a restructuring plan that would allow it to continue operating while trying to get into the clear.

Chapter 11, a tempting option

Avianca had no choice but to file for bankruptcy in the US and find new investors: once proudly all Colombian, today the brand still represents the country worldwide, but it is a UK-based firm.

The company emerged strong from Chapter 11, but Avianca’s resilience is mainly led by its business model change, which made a historic legacy carrier an efficient LCC. And after a period of hesitation, there’s no shame in admitting it.

Would GOL follow a similar path? So far, it’s hard to know. However, major changes must occur within its structure to be viable. Perhaps Chapter 11 is not only convenient but unavoidable.

If the company does not file in the US, it may face bankruptcy procedures under Brazilian law. And that “judiciary recovery” process is a mess of red tape that would take years and cost millions, freezing assets and leading to liquidation rather than continuity. That is not what GOL needs.

The carrier quickly stated that they were analyzing options and that there was no Chapter 11 filing for now. Carefully choosing its words, GOL didn’t say it was off the table.

It’s all about the context

GOL’s future looks grim, with over 130 aircraft in its fleet demanding regular leasing fees and a crunching cash flow. The success cases of LATAM and Avianca may prompt the decision to file for US bankruptcy protection.

The context was different, though: COVID hit hard on aircraft demand when both companies restructured their debt, so lessors were keen on renegotiating contracts. GOL’s Boeing 737NG and MAX fleet can be easily redistributed among paying customers with a recovered market. India’s Akasa is a prime example of how Boeing was able to move stuck Chinese aircraft into service.

Time is of the essence, and GOL’s hourglass is running out of sand. They flip it to start over, or South America could see one of its biggest players fade into oblivion. It could be like VARIG all over again.

Pablo Diaz
Correspondent | + posts

Pablo Diaz is an award-winning journalist based in Buenos Aires, Argentina.  He is also Editor In Chief of Aviacionline.com. Law, Engineering, and a pinch of science.  When in doubt, trust evidence.

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