Azul CFO Proposes Converting Dollar Debt to Brazilian Real
Airline seeks to reduce financial volatility by shifting currency exposure in its debt portfolio.
1Strategic Debt Realignment
Azul is actively planning to convert a significant portion of its dollar-denominated debt into Brazilian reais. CFO Antonio Garcia announced this shift during a third-quarter earnings call held on Thursday. The primary objective is to stabilize the company's financial results by mitigating the inherent risks associated with volatile currency exchange rate fluctuations.
2Current Debt Composition
Currently, only 7.3% of Azul's total debt is denominated in the local currency. When excluding aircraft-related financial obligations, the share of debt in reais increases to 17.0%. This represents a notable increase compared to the 6.6% level recorded one year ago, reflecting the company's ongoing efforts to adjust its balance sheet structure.
3Comparative Interest Costs
The cost of capital varies significantly between the two currencies currently utilized by the airline. The average cost for dollar-denominated debt stands at 9.9% per annum. In contrast, debt held in Brazilian reais carries a lower average cost of 9.0% per annum, providing a potential financial incentive for the proposed currency conversion strategy.
4Impact of Exchange Rates
Currency fluctuations have created inconsistent financial outcomes for the airline over recent periods. In the third quarter of 2025, the company experienced a loss of 33.7 million reais due to a 0.1% depreciation of the real against the dollar between June and September, contrasting sharply with previous gains of 918.7 million reais.
5Hedging Instrument Performance
To manage exposure to currency risks, Azul has implemented various currency protection contracts. These hedging instruments resulted in a loss of 10.9 million reais during the third quarter. The company continues to evaluate these financial tools as part of its broader risk management framework to protect against sudden market movements in exchange rates.
6Operational Financial Context
The airline industry is notoriously sensitive to currency movements, particularly because aircraft leasing and fuel costs are typically priced in dollars. By shifting debt to local currency, Azul aims to align its liabilities more closely with its revenue streams, which are primarily generated in Brazilian reais, thereby reducing the impact of external shocks.
7Market Volatility Management
The decision follows a period where the Brazilian real faced pressure against the US dollar. By reducing dollar exposure, the company seeks to insulate its bottom line from macroeconomic instability. This move is part of a wider trend among emerging market firms attempting to simplify their capital structures amidst global economic uncertainty and inflation.
8Future Financial Outlook
Investors will be monitoring how quickly Azul can execute this debt conversion and its effect on future interest expenses. The success of this strategy depends on market liquidity and the availability of favorable terms for real-denominated debt. This transition remains a critical component of the company's long-term plan to achieve sustainable financial health.
Original article: CNN Brasil — Azul CFO Proposes Converting Dollar Debt to Brazilian Real