AZUL SA [AZUL] Filings

20-F 1 azul-20231231.htm 20-F azul-20231231

As submitted to the Securities and Exchange Commission on May 15, 2024

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 20-F

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from _______________ to _______________

Commission file number: 001-38049

AZUL SA

(Exact name of Registrant as specified in its charter)

N/A
(Translation of Registrant’s name into English)

Federative Republic of Brazil
(Jurisdiction of incorporation or organization)

Avenida Marcos Penteado de Ulhôa Rodrigues, n. 939, 8th floor
Edifício Jatobá, Condomínio Castelo Branco Office Park

Tamboré, Barueri, State of São Paulo, Zip Code 06460-040
Federative Republic of Brazil
(Address of principal executive offices)

Alexandre Wagner Malfitani (Chief Financial Officer and Investor Relations Officer)
E-mail: invest@voeazul.com.br
Telephone: +55 (11) 4831-2880
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Title of each class

Trading Symbol

Name of each exchange on which registered

Preferred Shares without par value

AZUL

New York Stock Exchange*

American Depositary Shares (as evidenced by American Depositary Receipts), each representing three Preferred Shares

New York Stock Exchange

*Not for trading purposes, but only in connection with the listing on the New York Stock Exchange of American Depositary Shares representing those Preferred Shares.

Securities registered or to be registered pursuant to Section 12 (g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15 (d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

928,965,058 Common Shares
335,750,796 Preferred Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☒ No ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934.

Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404 (b) of the Sarbanes-Oxley Act (15 U.S.C. 7262 (b)) by the registered public accounting firm that prepared or issued its audit report.

Yes ☒ No ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☐

International Financial Reporting Standards as issued by
the International Accounting Standards Board ☒

Other ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court:

Yes ☐ No ☐


TABLE OF CONTENTS


		Page
INTRODUCTION		1
GLOSSARY OF AIRLINE AND OTHER TERMS:		1
FORWARD LOOKING STATEMENTS		8
P ART I
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	10
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	10
ITEM 3.	KEY INFORMATION	10
A.	Selected Financial Data	10
B.	Capitalization and Indebtedness	10
C.	Reasons for the Offer and Use of Proceeds	10
D.	Risk Factors	10
ITEM 4.	INFORMATION ON THE COMPANY	44
A.	History and Development of the Company	44
B.	Business Overview	45
C.	Organizational Structure	92
D.	Property, Plant and Equipment	93
ITEM 4A.	UNRESOLVED STAFF COMMENTS	94
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	94
A.	Operating Results	94
B.	Liquidity and Capital Resources	108
C.	Research and Development, Patents and Licenses	112
D.	Trend Information	112
E.	Critical Accounting Estimates	113
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	113
A.	Directors and Senior Management	113
B.	Management Compensation	120
C.	Board Practices	125
D.	Employees	126
E.	Share Ownership	127
F .	Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation	128
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	129
A.	Major Shareholders	129
B.	Related Party Transactions	130
C.	Interests of Experts and Counsel	134
ITEM 8.	FINANCIAL INFORMATION	134
A.	Consolidated Statements and Other Financial Information	134
B.	Significant Changes	138


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ITEM 9.	THE OFFER AND LISTING	138
A.	Offering and Listing Details	138
B.	Plan of Distribution	138
C.	Markets	138
D.	Selling Shareholders	141
E.	Dilution	141
F.	Expenses of the Issue	141
ITEM 10.	ADDITIONAL INFORMATION	141
A.	Share Capital	141
B.	Memorandum and Articles of Association	141
C.	Material Contracts	150
D.	Exchange Controls	150
E.	Taxation	150
F.	Dividends and Payment Agents	160
G.	Statements by Experts	160
H.	Documents on Display	160
I.	Subsidiary Information	161
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	161
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	163
A.	Debt Securities	163
B.	Warrants and Rights	163
C.	Other Securities	163
D.	American Depositary Shares	163
PART II
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	173
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	173
ITEM 15.	CONTROLS AND PROCEDURES	173
ITEM 16.	[RESERVED]	174
A.	Audit Committee Financial Expert	174
B.	Code of Ethics	174
C.	Principal Accountant Fees and Services	174
D.	Exemptions from the Listing Standards for Audit Committees	175
E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	175
F.	Change in Registrant’s Certifying Accountant	175
G.	Corporate Governance	175
H.	Mine Safety Disclosure	177
I .	Disclosure Regarding Foreign Jurisdictions That Prevent Inspections	177
J .	Insider Trading Policies	178
K .	Cybersecurity	178


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PART III
ITEM 17.	FINANCIAL STATEMENTS	180
ITEM 18.	FINANCIAL STATEMENTS	180
ITEM 19.	EXHIBITS	180
INDEX TO FINANCIAL STATEMENTS		F-2


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INTRODUCTION

In this annual report, the discussion of our business includes the business of Azul S.A. and its direct and indirect subsidiaries. Unless otherwise indicated or the context otherwise requires, “Azul” “we,” “us,” “our” or the “Company” refer to Azul S.A. and its consolidated subsidiaries. The term “Brazil” refers to the Federative Republic of Brazil and the phrase “Brazilian government” refers to the federal government of Brazil. “Central Bank” refers to the Brazilian Central Bank (Banco Central do Brasil). References in the annual report to “real,” “reais” or “R$” refer to the Brazilian real, the official currency of Brazil and references to “U.S. dollar,” “U.S. dollars” or “US$” refer to U.S. dollars, the official currency of the United States of America.


GLOSSARY OF AIRLINE AND OTHER TERMS:

The following is a glossary of industry and other defined terms used in this annual report:

•“ABEAR” means the Brazilian Association of Airline Companies (Associação Brasileira das Empresas Aéreas).

•“ABRACORP” means the Brazilian Corporate Agencies Association (Associação Brasileira de Agências Corporativas).

•“ADR” means American depositary receipts.

•“ADS” means American depositary shares.

•“Aeroportos Brasil,” a private consortium that operates Viracopos airport jointly with INFRAERO.

•The “Águia Branca Group,” or “Grupo Águia Branca,” is a Brazilian transportation and logistics conglomerate controlled by the Chieppe family.

•“Airbus” means Airbus S.A.S.

•“Airbus Group” means Airbus Group N.V.

•“aircraft utilization” represents the average number of block hours operated per day per aircraft for our operating fleet, excluding spare aircraft and aircraft in maintenance.

•“ALAB” refers to the main operating subsidiary of the Company, namely “Azul Linhas Aéreas Brasileiras S.A.”

•“ANAC” refers to the Brazilian National Civil Aviation Agency (Agência Nacional de Aviação Civil).

•“Atlantic Gateway” means Atlantic Gateway, SPGS, Lda., an entity jointly owned by our principal shareholder, Hainan and another European investor.

•“ATR” means aircraft with turboprop propulsion manufactured by Avions de Transport Régional G.I.E.

•“audited consolidated financial statements” means our audited consolidated financial statements as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021.

•“available seat kilometers,” or “ASKs,” represents aircraft seating capacity multiplied by the number of kilometers the aircraft is flown.

•“average fare” means total passenger revenue divided by passenger flight segments.

•“average ticket revenue per booked passenger” means total passenger revenue divided by booked passengers.

•“Avianca Brasil” means Oceanair Linhas Aéreas S.A.

•“Azul Investments” means Azul Investments LLP.

•“Azul Secured Finance” means Azul Secured Finance LLP.

•“Azul Viagens” means ATS Viagens e Turismo Ltda.

•“B3” means the Brazilian Stock Exchange (B3 S.A. – Brasil, Bolsa, Balcão).

•“block hours” means the number of hours during which the aircraft is in revenue service, measured from the time it closes the door at the departure of a revenue flight until the time it opens the door at the arrival on the gate at destination.

•“Boeing” means The Boeing Company.

•“booked passengers” means the total number of passengers booked on all passenger flight segments.

•“CADE” refers to the Brazilian Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica), the Brazilian antitrust authority.

•“Calfinco” means Calfinco, Inc., a wholly-owned subsidiary of United Airlines, Inc.


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•“CAPA” means the Centre for Aviation, a provider of independent aviation market intelligence, analysis and data services.

•“Cape Town Convention” means the Convention on International Interests in Mobile Equipment and its protocol on Matters Specific to Aircraft Equipment, concluded in Cape Town on November 16, 2001.

•“CASK” represents total operating cost divided by available seat kilometers.

•“CBP” means United States Customs and Border Protection.

•“Cirium” means a real-time provider of data for analyzing route dynamics, passenger demand and operational performance.

•“CMN” means the Brazilian National Monetary Council (Conselho Monetário Nacional).

•“completion rate” means the percentage of completion of our scheduled flights that were operated by us, whether or not delayed (i.e., not cancelled).

• “COVID-19” means the novel coronavirus that surfaced in the city of Wuhan, China in December 2019.

•“CPPI” means the Council of the Brazilian Investment Partnership Program (Conselho do Programa de Parceria de Investimentos).

•“crewmembers” is a term we use to refer to all our employees, including aircraft crew, airport ground, call center, maintenance and administrative personnel.

•“CVM” means the Brazilian Securities Commission (Comissão de Valores Mobiliários).

•“DECEA” means the Brazilian Department of Airspace Control (Departamento de Controle do Espaço Aéreo).

•“departure” means a revenue flight segment.

•“DOT” means the United States Department of Transportation.

•“EASA” means the European Union Aviation Safety Agency.

•“economic interest” means a participation in the total equity value of our company, calculated as if all common shares issued and outstanding had been converted into preferred shares at the conversion ratio of 75.0 common shares to 1.0 preferred share pursuant to the mechanisms set forth in our bylaws.

•“E-Jets” refer to narrow-body jets manufactured by Embraer S.A.

•“Embraer” means Embraer S.A.

• “ESG” means Environmental, Social and Governance practices.

•“FAA” means the United States Federal Aviation Administration.

•“FGV” refers to the Getúlio Vargas Foundation (Fundação Getúlio Vargas), a Brazilian higher education institution that was founded in December 1944.

•“financial statements” refers to our audited consolidated financial statements.

•“flight hours” means the number of hours during which the aircraft is in revenue service, measured from the time it takes off until the time it lands at the destination.

•“focus-city” means a destination from which an airline operates several point-to-point routes. A focus-city may also function as a smaller scale hub.

•“FTEs” means full-time equivalent employees.

•“FTEs per aircraft” means the number of FTEs divided by the number of operating aircraft.

•“Global Distribution System” or “GDS” means a system that enables automated transactions between airlines and travel agencies. Travel agencies traditionally rely on GDS for services, products and rates in order to provide travel-related services to end consumers. GDS can link services, rates and bookings consolidating products and services across different travel sectors including airline reservations, hotel reservations and car rental. GDS charges participant airlines a booking fee per passenger and segment sold, typically applying additional charges for ticketing, credit card authorizations, real time connectivity, information pages and other ancillary services.

•“Gol” means Gol Linhas Aéreas Inteligentes S.A., or its operating subsidiary Gol Linhas Aéreas S.A.

•“gross billings” means the result of the sale of points to commercial partners and the cash portion of points plus money transactions. It is not an accounting measurement. This revenue may affect the current period or may be recognized as revenue in future periods, depending on the time of redemption on the part of program participants.

•“Hainan” means Hainan Airlines Holding Co., Ltd.

•“IATA” means the International Air Transport Association.

•“IBGE” means the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística).


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•“ICAO” means the International Civil Aviation Organization.

•“IFRS” means International Financial Reporting Standards, as issued by the International Accounting Standards Board.

•“INFRAERO” means Empresa Brasileira de Infraestrutura Aeroportuária—INFRAERO, a Brazilian state-controlled corporation reporting to the Ministry of Infrastructure that is in charge of managing, operating and controlling federal airports, including control towers and airport safety operations.

•“INPI” means the Brazilian Institute of Industrial Property (Instituto Nacional da Propriedade Industrial).

•“IntelAzul S.A." or “IntelAzul” means the entity formerly known as TRIP Linhas Aéreas S.A. and Tudo Azul S.A., which was acquired by Azul, in 2012, and subsequently changed its corporate name to “IntelAzul S.A.”

•“IP Co” means Azul IP Cayman Ltd.

•“IP HoldCo” means Azul IP Cayman Holdco Ltd.

•“JetBlue” means JetBlue Airways Corporation.

•“LATAM” means Latam Airlines Group S.A. including all of its subsidiaries. LATAM was formed in 2012, through the acquisition of TAM S.A., or TAM Linhas Aéreas S.A., by Lan Airlines S.A.

•“load factor” means the percentage of aircraft seats actually occupied on a flight (RPKs divided by ASKs).

•“main competitors” refers to Gol and LATAM, our competitors in the Brazilian market that have a market share larger than ours and publicly disclose their results of operations from time to time. When used in the singular, the term “main competitor” refers to Gol, our only direct competitor for which stand-alone information is publicly available.

•“LATAM Pass” is LATAM’s loyalty program.

•“Lilium” means Lilium GmbH, a wholly owned subsidiary of Lilium N.V.

•“Net promoter score or NPS” means a customer loyalty metric that we use to measure how willing a customer is to recommend our service.

•“NYSE” means the New York Stock Exchange.

•“on-time performance” refers to the percentage of an airline’s scheduled flights that were operated and that arrived within 15 minutes of the scheduled time.

•“operating fleet” means aircraft in service, spare aircraft and aircraft undergoing maintenance.

•“passenger flight segments” means the total number of revenue passengers flown on all revenue flight segments.

•“Petrobras” means Petróleo Brasileiro S.A., a mixed economy corporation in the oil and gas industry that is majority owned by the Brazilian government.

•“pitch” means the distance between a point on one seat and the same point on the seat in front of it.

•“PRASK” means passenger revenue divided by ASKs.

•“PRASK premium” refers to the positive difference between an airline’s PRASK and its main competitor’s PRASK over a given time period.

•“preferred shares” means our preferred shares issued and outstanding.

•“principal shareholder” means David Gary Neeleman, or simply David Neeleman.

•“RAB” means the Brazilian Aeronautical Registry (Registro Aeronáutico Brasileiro).

•“RASK” or “unit revenue” means operating revenue divided by ASKs.

•“revenue passenger kilometers” or “RPKs” means one-fare paying passenger transported per kilometer. RPK is calculated by multiplying the number of revenue passengers by the number of kilometers flown.

•“route” means a segment between a pair of cities.

•“Shareholders’ Agreement” means that certain shareholders’ agreement, dated September 1, 2017 and amendment dated on March 3, 2021 entered into by and between us and the holders of our common shares, David Neeleman, Trip, Rio Novo and Calfinco.

•“Smiles” means Smiles Fidelidade S.A., Gol’s loyalty program.

•“stage length” means the average number of kilometers flown per flight.

•“TAP” means TAP – Transportes Aéreos Portugueses, SGPS, S.A.

•“TAP Bonds” means Tranche A 7.5% bonds due March 2026 issued by TAP.

•“TRIP” means the entity formerly known as TRIP Linhas Aéreas S.A. and Tudo Azul S.A., which was acquired by Azul in 2012 and subsequently changed its corporate name to "IntelAzul S.A.”


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•“TRIP acquisition” means our 2012 acquisition of TRIP.

•“trip cost” represents operating expenses adjusted for non-recurring events divided by departures.

•“TRIP’s former shareholders” means, collectively, the Caprioli family and the Águia Branca Group.

•“TSA” means the United States Transportation Security Administration.

• “TwoFlex” means Azul Conecta Ltda. (“Azul Conecta”) previously known as Two Táxi Aéreo Ltda.

•“United” means United Airlines Inc.

•“Vibra Energia” means Vibra Energia S.A., an energy company, formerly known as “BR Distribuidora”.

•“Viracopos” means the main airport of Campinas, located approximately 100 km from the city of São Paulo, State of São Paulo.

•“yield” represents the average amount one passenger pays to fly one kilometer.

Summary of Risk Factors

An investment in our preferred shares is subject to a number of risks, including risks relating to the nature of our business as an airline and the aviation industry, our operations in Brazil and our common shares. The following list summarizes some, but not all, of these risks. Please read the information in the section entitled “Risk Factors” for a more thorough description of these and other risks.

Risk Relating to Our Business and the Brazilian Aviation Industry

•Because the airline industry is characterized by high fixed costs and relatively elastic revenues, airlines cannot quickly reduce their costs to respond to shortfalls in expected revenues and this may harm our ability to attain our strategic goals.

•Further consolidation in the Brazilian and global airline industry may adversely affect us.

•Substantial fluctuations in fuel costs or the unavailability of fuel, which is mostly provided by one supplier, would have an adverse effect on us.

•We are highly dependent on our three hubs at Viracopos airport, Confins airport and Recife airport for a large portion of our business and as such, a material disruption at any of our hubs could adversely affect us.

•We depend significantly on automated systems and any cyberattacks, breakdown, hacking or changes in these systems, as well as any technical and operational problems in the Brazilian civil aviation infrastructure, may adversely affect us.

•We depend on our senior management team, and the loss of any member of this team, including our Chairman and key executives, could adversely affect us.

•Changes to the Brazilian civil aviation regulatory framework may adversely affect us.

•We have a significant amount of indebtedness and other financial obligations and insufficient liquidity may have a material adverse effect on our financial condition and business.

•Changes in the credit ratings issued by credit rating agencies could adversely affect our ability to raise funding, our cost of financing and the market price of our securities.

•The outbreak of highly contagious diseases worldwide, such as the COVID-19 pandemic, had, and may in the future cause, a material adverse effect on our business, financial condition, liquidity and results of operations.

Risk Relating to Brazil

•The Brazilian federal government has exercised, and continues to exercise, significant influence over the Brazilian economy. This involvement as well as Brazil’s political and economic conditions could harm us and the price of our preferred shares, including in the form of ADSs.

•Economic, health, political, and environmental crises, or any other kind of crisis that has the ability to impact the Brazilian economy, may affect the Brazilian population’s purchasing power, which may result in a decrease in demand for air travel and, consequently, affect our business.

•We cannot predict which policies the President of Brazil may adopt or change during his mandate or the effect that any such policies might have on our business and on the Brazilian economy.

•Exchange rate instability may have adverse effects on the Brazilian economy, us and the price of our preferred shares, including in the form of ADSs.


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•Developments and the perceptions of risks in other countries, including other emerging markets, the United States and Europe, and developments relating to the Russia-Ukraine conflict and relating to the conflict among Israel and militant groups in the Middle East (including Hamas), may adversely affect the Brazilian economy and the price of Brazilian securities, including the price of our preferred shares, including in the form of ADSs.

•Variations in interest rates may have adverse effects on us.

•Deficiencies in Brazilian infrastructure, particularly in airports and ports, may adversely affect us.

•Climate change, including increased regulation of our CO2 emissions, changing consumer preferences and the potential increased impacts of severe weather events on our operations and infrastructure.

Risk Relating to Our Preferred Shares, Including in the Form of ADSs

•Our controlling shareholder has the ability to direct our business and affairs, and its interests may conflict with that of other shareholders.

•An active and liquid trading market for our preferred shares, including in the form of ADSs, may not be maintained, thereby potentially adversely affecting the price our preferred shares, including in the form of ADSs.

•Our preferred shares will have limited voting rights.

•The sale of a significant number of our preferred shares, including in the form of ADSs, may negatively affect the trading price of our preferred shares, including in the form of ADSs.

•The Brazilian government may impose exchange controls and significant restrictions on remittances of reais abroad, which would adversely affect your ability to convert and remit dividends or other distributions or the proceeds from the sale of our preferred shares, our capacity to make dividend payments or other distributions to non-Brazilian investors and would reduce the market price of our preferred shares, including in the form of ADSs, and our capacity to comply with payment obligations in foreign currency.

•If we do not maintain a registration statement and no exemption from the Securities Act is available, U.S. Holders of ADSs will be unable to exercise preemptive rights with respect to our preferred shares.

•The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members or executive officers.

•If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, the market price and trading volume of our preferred shares, including in the form of ADSs could decline.

•Our status as a foreign private issuer allows us to follow alternate standards to the corporate governance standards of the NYSE, which may limit the protections afforded to investors.

Market Share and Other Information

This annual report contains data related to economic conditions in the market in which we operate. The information contained in this annual report concerning economic conditions is based on publicly available information from third-party sources that we believe to be reasonable. Data and statistics regarding the Brazilian civil aviation market are based on publicly available data published by ANAC, INFRAERO, ABRACORP, Ministry of Transportation, Ports and Civil Aviation and Aeroportos Brasil, among others. Data and statistics regarding international civil aviation markets are based on publicly available data published by ICAO or IATA. We also make statements in this annual report about our competitive position and market share in, and the market size of, the Brazilian airline industry. We have made these statements on the basis of statistics and other information from third-party sources that we believe to be reasonable, such as Cirium, ANAC and Dados Comparativos Avançados (Advanced Comparative Data, a monthly report issued by ANAC that contains preliminary information on the number of ASKs and RPKs recorded in the Brazilian civil aviation market), and ABEAR. In addition, we include additional operating and financial information about Gol, LATAM, Smiles and LATAM Pass, which is derived from the information released publicly by them, including disclosure filed with or furnished to the SEC and other information made available on their respective websites. Although we have no reason to believe any of this information or these reports are inaccurate in any material respect and believe and act as if they are reliable, we have not independently verified it. Governmental publications and other market sources, including those referred to above, generally state that their information was obtained from recognized and reliable sources, but the accuracy and completeness of that information is not guaranteed. In addition, the data that we compile internally and our estimates have not been verified by an independent source.


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Presentation of Financial and Other Information

Our audited consolidated financial statements, as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021 are included in this annual report. Our financial statements were prepared in accordance with the International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.

The financial information presented in this annual report should be read in conjunction with our financial statements, the related notes included elsewhere in this annual report and the section of this annual report entitled “Item 5. Operating and Financial Review and Prospects.”

Convenience Translations

This annual report contains conversions of certain Brazilian real amounts into U.S. dollar amounts at specified rates solely for the convenience of the reader. These conversions should not be construed as representations that the Brazilian real amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate or any other exchange rate as of that or any other date. Unless we indicate otherwise, the U.S. dollar equivalent for information in Brazilian reais is based on the commercial selling rate published by the Central Bank on December 31, 2023, which was R$4.8413 per US$1.00. The Federal Reserve Bank of New York does not report a noon buying rate for Brazilian reais.

Rounding

Certain amounts and percentages included in this annual report, including in the section entitled “Item 5. Operating and Financial Review and Prospects,” have been rounded for ease of presentation. Percentage figures included in this annual report have not been calculated in all cases on the basis of the rounded figures but on the basis of the original amounts prior to rounding. For this reason, certain percentage amounts in this annual report may vary from those obtained by performing the same calculations using the figures in our financial statements. Certain other amounts that appear in this annual report may not add up due to rounding.

Note Regarding Operating Data

The following operating data are often provided, and utilized by the Company’s management, analysts, and investors to enhance comparability of year-over-year results, as well as to compare results to other airlines: Available seat kilometers (ASKs); Passenger revenue per ASK (PRASKs); Operating revenue per ASK (RASK); and total operating cost divided by ASK (CASK) amongst others.


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Operating Data


	As of and For the Years Ended December 31,
	2023		2023		2022		2021
	(US$)(1)		(R$)		(R$)		(R$)

Operating Statistics (unaudited)
Operating passenger aircraft at end of period	183		183		177		161
Contractual passenger aircraft at end of period	189		189		194		179
Cities served at end of period	162		162		158		147
Average daily aircraft utilization (hours)	10.0		10.0		9.1		8.3
Stage length (km)	1,159		1,159		1,105		1,057
Number of departures	316,896		316,896		304,429		245,102
Block hours	550,843		550,843		518,813		409,424
Passenger flight segments	29,277,728		29,277,728		27,485,369		23,311,416
Revenue passenger kilometers (RPKs) (million)	35,399		35,399		31,561		24,851
Available seat kilometers (ASKs) (millions)	44,006		44,006		39,579		31,386
Load Factor (%)	80.4	%	80.4	%	79.7	%	79.2	%
Passenger revenue (in thousands)	US$3,558,492		R$17,227,728		R$14,594,945		R$8,811,044
Passenger revenue adjusted (in thousands)(2)	US$3,586,412		R$17,362,896		R$14,595,579		R$8,811,044

PRASK adjusted (cents)(2)	US$8.15		R$39.46		R$36.88		R$28.07

RASK adjusted (cents)(2)	US$8.77		R$42.48		R$40.29		R$31.78

Yield per ASK adjusted (cents)(2)	US$10.13		R$49.05		R$46.25		R$35.46

Trip cost adjusted(3)	US$10,295.13		R$49,841.79		R$48,656.35		R$40,508.56
End-of-period FTEs per aircraft	83		83		77		86

CASK adjusted (cents)(3)	US$7,410.00		R$35.89		R$37.42		R$31.63
CASK ex-fuel adjusted (cents)(3)	US$4,650.00		R$22.51		R$20.85		R$21.26
Fuel liters consumed (thousands)	1,291		1,291		1,207		980
Average fuel cost per liter	US$940		R$4.56		R$5.44		R$3.32


(1)			For convenience purposes only, the amounts in reais as of December 31, 2023 have been translated to U.S. dollars using the rate of R$4.8413, which corresponds to the commercial selling rate for US$1.00 as of December 31, 2023, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or at any other exchange rate.
(2)			Passenger revenue adjusted, PRASK adjusted, RASK adjusted and Yield per ASK adjusted for non-recurring items.
(3)			Trip cost adjusted, CASK adjusted and CASK excluding all fuel costs adjusted for non-recurring items and impairment.


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FORWARD-LOOKING STATEMENTS

This annual report includes estimates and forward-looking statements principally under the captions “Item 3. Key Information” and “Item 5. Operating and Financial Review and Prospects.”

These estimates and forward-looking statements are based mainly on our current expectations and estimates of future events and trends that affect or may affect our business, financial condition, results of operations, cash flow, liquidity, prospects and the trading price of our preferred shares, including in the form of ADSs. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to many significant risks, uncertainties and assumptions and are made in light of information currently available to us.

These statements appear throughout this annual report and include statements regarding our intent, belief or current expectations in connection with:

•the economic, financial and other effects of pandemics, epidemics, diseases, public health threats and similar crises (including the coronavirus, or COVID-19, pandemic), and governmental responses thereto, particularly as such factors impact or may impact Brazil and the other markets in which we operate, thus adversely affecting our results of operations and financial condition, and heightening many of the other risks described in the “Risk Factors” section of this annual report;

•developments and the perception of risks in connection with laws, regulations and policies the President of Brazil, Luiz Inácio Lula da Silva, may adopt or change during his term in office, including economic, healthcare and fiscal reforms, any of which may negatively affect growth prospects in the Brazilian economy as a whole;

•our ability to implement in a timely and efficient manner, any measure necessary to respond to or reduce the impacts of developments related to pandemics, epidemics, diseases, public health threats and similar crises (including the COVID-19 pandemic), on our business, operations, cash flow, prospects, liquidity and financial conditions;

•changes in market prices, customer demand and preferences and competitive conditions;

•general economic, political and business conditions in Brazil, particularly in the geographic markets we serve as well as any other countries where we currently operate and may operate in the future, including developments and the perception of risks in connection with volatility from the heightened political and social tensions following the 2022 presidential elections in Brazil;

•our ability to keep costs low;

•existing and future governmental regulations;

•increases in maintenance costs, fuel costs and insurance premiums, especially in light of the Russia-Ukraine conflict and of conflicts in the Middle East;

•our ability to maintain landing rights in the airports where we operate;

•air travel substitutes;

•labor disputes, employee strikes and other labor-related disruptions, including in connection with negotiations with unions;

•our ability to attract and retain qualified personnel;

•our aircraft utilization rate;

•defects or mechanical problems with our aircraft;

•our ability to successfully implement our growth strategy, including our expected fleet growth, passenger growth, our capital expenditure plans, our future joint venture and partnership plans, our ability to enter new airports (including certain international airports), that match our operating criteria;

•management’s expectations and estimates concerning our future financial performance and our financing, plans and programs, as well as our plans for refinancing or amending our financial obligations;

•our level of debt and other fixed obligations;

•our reliance on third parties, including changes in the availability or increased cost of air transport infrastructure and airport facilities;

•inflation, appreciation, depreciation and devaluation of the real, as well as interest rates and exchange rates in Brazil and the other markets in which we operate, which have been particularly volatile as a result of, among other factors, monetary stimulus in response to the COVID-19 pandemic, supply chain disruptions and geopolitical tensions (such as tensions as a result of the Russia-Ukraine conflict and the escalation of conflicts in the Middle East);

•our lessors and aircraft and engine suppliers, as well as our commercial relationship with them;


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•risks associated with cybersecurity incidents and privacy, including potential disruptions to our information technology systems, and information security breaches;

•impact of global climate change and legal, regulatory or market response to such change;

•increasing attention to, and evolving expectations regarding ESG matters; and

•other factors or trends affecting our financial condition or results of operations, including those factors identified or discussed as set forth under “Item 3.D. Risk Factors.”

The words “believe,” “understand,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “seek,” “intend,” “expect,” “should,” “could,” “forecast” and similar words are intended to identify forward-looking statements. You should not place undue reliance on such statements, which speak only as of the date they were made. We do not undertake any obligation to update publicly or to revise any forward-looking statements after we file this annual report because of new information, future events or other factors. Our independent auditors have neither examined nor compiled the forward-looking statements and, accordingly, do not provide any assurance with respect to such statements. In light of the risks and uncertainties described above, the future events and circumstances discussed in this annual report might not occur and are not guarantees of future performance. Because of these uncertainties, you should not make any investment decision based upon these estimates and forward-looking statements.


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PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A.[Reserved]

B.Capitalization and Indebtedness

Not applicable.

C.Reasons for the Offer and Use of Proceeds

Not applicable.

D.Risk Factors

The risks described below are those that we consider material to our business and an investment in our securities. In general, investing in the securities of issuers in emerging market countries such as Brazil involves risks that are different from the risks associated with investing in the securities of U.S. companies and companies located in other countries with more developed capital markets. You should carefully consider the risks described below. We believe we could be materially and adversely affected by any of these risks. Other risks that we currently deem immaterial or that are currently not known to us may also adversely affect us.

To the extent that information relates to, or is obtained from sources related to, the Brazilian government or Brazilian macroeconomic data, industry data or other third parties, the following information has been extracted from official publications of the Brazilian government or other reliable third-party sources and has not been independently verified by us.

Risks Relating to Brazil

The Brazilian federal government has exercised, and continues to exercise, significant influence over the Brazilian economy. This involvement as well as Brazil’s political and economic conditions could harm us and the price of our preferred shares, including in the form of ADSs.

The Brazilian federal government frequently exercises significant influence over the Brazilian economy and occasionally makes significant changes in monetary, credit, fiscal and other policies and regulations. The Brazilian government’s actions to control inflation and other policies and regulations have often involved, among other measures, changes in monetary and tax policies, price controls, foreign exchange rate controls, currency devaluations, capital controls and limits on imports. We have no control over and cannot predict what measures or policies the Brazilian government may take in the future. We and the market price of our securities may be adversely affected by changes in Brazilian government policies, as well as general economic factors, including, without limitation:

•growth or downturn of the Brazilian economy;

•interest rates and monetary policies;

•exchange rates and currency fluctuations;

•inflation;

•liquidity of the domestic capital and lending markets;


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•import and export controls;

•exchange controls and restrictions on remittances abroad and payments of dividends;

•modifications to laws, regulations and policies according to political, social and economic interests;

•fiscal policy and changes in tax laws and related interpretations by tax authorities;

•economic, political and social instability, including general strikes and mass demonstrations;

•increases in unemployment;

•labor and social security regulations;

•changes in environmental, health and safety laws and regulations;

•energy and water shortages and rationing;

•public health, including as a result of epidemics and pandemics, such as the COVID-19 pandemic;

•the Brazilian government’s intervention, modification or rescission of existing concessions;

•the Brazilian government’s control of or influence on the control of certain oil producing and refining companies; and

•other political, social and economic developments in or affecting Brazil.

In addition, from 2014 to 2016, Brazil was in a recession, and from 2017 to 2019, it grew slowly. As a result of the COVID-19 pandemic and related economic impact, Brazil’s Gross Domestic Product (GDP) increased 1.1% in 2019, declined by 4.1% in 2020, then increased by 4.6% in 2021, exceeding the loss caused by the effects of the COVID-19 pandemic in 2020. GDP increased by 2.9% in 2022 and 2023 by 2.9% in 2023.

The Brazilian federal government is facing increasing pressures from the population to implement economic reforms. We cannot predict what measures the Brazilian federal government will take in the face of mounting macroeconomic pressures or otherwise.

Developments in Brazil’s political landscape may also impact us. Uncertainty regarding political developments and over whether the current government of President Luis Inácio Lula da Silva or future Brazilian governments will implement changes in policy or regulation affecting these or other factors in the future, including as a result of impacts of the Russia-Ukraine conflict, the conflict among Israel and militant groups in the Middle East (including Hamas), emerging geopolitical conflicts (including rising tensions between China and Taiwan and the relationship between China and the United States), other internal or external factors sustaining persistent inflation, among other factors, may affect economic performance and contribute to economic uncertainty in Brazil, which may have an adverse effect on us and our preferred shares, including in the form of ADSs. Recent economic and political instability has led to a negative perception of the Brazilian economy and higher volatility in the Brazilian securities markets, which also may adversely affect us and the trading price of our preferred shares, including in the form of ADSs. We cannot predict what future policies will be adopted by current or future Brazilian governments, or whether these policies will result in adverse consequences to the Brazilian economy or cause an adverse effect on us. See “—The ongoing economic uncertainty and political instability in Brazil may adversely affect us and the price of our preferred shares, including in the form of ADSs.”

Economic, health, political, and environmental crises, or any other kind of crisis that has the ability to impact the Brazilian economy, may affect the Brazilian population’s purchasing power, which may result in a decrease in sales of our products and services. Between 2014 and 2016 for example, when the Brazilian economy faced one of the worst recessions in history, the country's GDP decreased by 3.5% in 2015 and 3.3% in 2016. However, for the year ended December 31 2023, due to its sustainable competitive advantages of its business model, Azul reached a record operating revenue of R$18.6 billion, representing an increase of 16.3% compared to for the year ended December 31, 2022. This clearly demonstrates the strength of our business model.


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The ongoing economic uncertainty and political instability in Brazil may adversely affect us and the price of our preferred shares, including in the form of ADSs.

Brazil has experienced economic instabilities caused by various political and economic events in recent years, with the slowdown in GDP growth and effects on supply factors (including levels of investment and increases in the use of technology in production) and demand factors (including employment rates and income levels). Consequently, uncertainty about whether the Brazilian government will be able to approve the economic reforms needed to improve the deterioration of public accounts and the economy led to a decline in market confidence in the Brazilian economy. The Brazilian economy remains subject to government policies and actions, which, if not successful or implemented, could affect the operations and financial performance of companies, including ours. The recent economic and political instability in Brazil has contributed to a decline in market confidence in the Brazilian economy as well as to a deteriorating political environment.

In addition, in recent years, the Brazilian political scenario has experienced intense instability mainly due to the unfolding of a corruption scheme involving several politicians, including high-ranking members of the government, which resulted in the impeachment of a Brazilian President and lawsuits filed against her successor and team. Various investigations into allegations of money laundering and corruption conducted by the Office of the Brazilian Federal Prosecutor, including the largest such investigation, known as Lava Jato, negatively impacted the Brazilian economy and political environment, the general market perception of the Brazilian economy, political environment and the Brazilian capital markets, as well as the image and reputation of the companies involved. Members of the Brazilian government, as well as senior officers of large state-owned companies, have faced allegations or convictions of, or have entered into plea bargain or leniency agreements for crimes related to crimes of political of corruption and money laundering. Although the task force in connection with Lava Jato was wound up in February 2021, we cannot assure that new investigations will not be launched or that additional persons will not become subject to investigation.

We have no control over, and cannot predict, whether such investigations, allegations, convictions, plea bargains and agreements will lead to further political and economic instability or whether new allegations, convictions, plea bargaining or agreements against or with government officials, officers and/or companies will arise in the future. In addition, we cannot predict the outcome of any such allegations, convictions, plea bargains and agreements, nor their effect on the Brazilian economy.

In addition, political demonstrations in Brazil over the last few years have affected the development of the Brazilian economy and investors’ perceptions of Brazil.

The aftermath of the 2022 presidential election (including the January 8, 2023 violent disruption at Brazil’s congress, presidential palace and supreme court) left Brazil in what many consider to be a heightened state of political and social tension. It is unclear whether this tension will dissipate or intensify over time and what resulting impacts may occur to adversely affect our business operations or the safety of our customers, our employees or the communities in which we operate.

We cannot guarantee that the unfolding of these events will not lead to additional adverse impacts on Brazil's political and economic situation. Furthermore, we cannot guarantee that other current or future political events, including new allegations against former or current government officials, may not come to cause even more instability in the Brazilian economy, in capital markets, or in the listing of our shares.

Moreover, the policies President Luiz Inácio Lula da Silva may adopt or alter may have material adverse effects on the macroeconomic environment in Brazil, as well as on businesses operating in Brazil, including ours. See “—We cannot predict which policies the President of Brazil may adopt or change during his mandate or the effect that any such policies might have on our business and on the Brazilian economy.”

Any of the above factors may create additional political uncertainty, which could have a material adverse effect on the Brazilian economy and, consequently, on us and the price of our preferred shares, including in the form of ADSs.


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We cannot predict which policies the President of Brazil may adopt or change during his mandate or the effect that any such policies might have on our business and on the Brazilian economy.

In 2022, Brazil held elections for President and Luiz Inácio Lula da Silva was elected president. We cannot predict what policies he will maintain and which policies he may adopt or change during his mandate or the effect that any such policies might have on our business and on the Brazilian economy. Furthermore, uncertainty over whether the acting Brazilian government under the administration of President Luiz Inácio Lula da Silva will implement changes in policy or regulation in the future may contribute to economic uncertainty in Brazil and to heightened volatility in the securities issued abroad by Brazilian companies. Any such new policies or changes to current policies may have a material adverse effect on us or the price of our preferred shares, including in the form of ADRs.

Exchange rate instability may have adverse effects on the Brazilian economy, us and the price of our preferred shares, including in the form of ADSs.

The Brazilian currency has been historically volatile and has devalued frequently over the past three decades. Throughout this period, the Brazilian government has implemented various economic plans and used various exchange rate policies, including sudden devaluations, periodic mini-devaluations (during which the frequency of adjustments has ranged from daily to monthly), exchange controls, dual exchange rate markets and a floating exchange rate system. Although long-term depreciation of the real is generally linked to the rate of inflation in Brazil, depreciation of the real occurring over shorter periods has resulted in significant variations in the exchange rate between the real, the U.S. dollar and other currencies. In 2021, the real depreciated against the U.S. dollar and, as of December 31, 2021, the U.S. dollar selling rate reported by the Central Bank was R$5.58 per US$1.00. In 2022, the real appreciated against the U.S. dollar and, as of December 31, 2022, the U.S. dollar selling rate reported by the Central Bank was R$5.22 per US$1.00. In 2023, the real further appreciated against the U.S. dollar and, as of December 31, 2023, the U.S. dollar selling rate reported by the Central Bank was R$4.84 per US$1.00. There can be no assurance as to whether the real will appreciate or depreciate against the U.S. dollar or other currencies in the future.

A devaluation of the real relative to the U.S. dollar could create inflationary pressures in Brazil and cause the Brazilian government to, among other measures, increase interest rates. Any depreciation of the real may generally restrict access to the international capital markets. It would also reduce the U.S. dollar value of our results. Restrictive macroeconomic policies could reduce the stability of the Brazilian economy and adversely affect our results of operations and profitability. In addition, domestic and international reactions to restrictive economic policies could have a negative impact on the Brazilian economy. These policies and any reactions to them may adversely affect us by curtailing access to foreign financial markets and prompting further government intervention. A devaluation of the real relative to the U.S. dollar may also, as in the context of the current economic slowdown, decrease consumer spending, increase deflationary pressures and reduce economic growth.

On the other hand, an appreciation of the real relative to the U.S. dollar and other foreign currencies may deteriorate the Brazilian foreign exchange current accounts. We and certain of our suppliers purchase goods and services from countries outside Brazil, and thus changes in the value of the U.S. dollar compared to other currencies may affect the costs of goods and services that we purchase. Depending on the circumstances, either devaluation or appreciation of the real relative to the U.S. dollar and other foreign currencies could restrict the growth of the Brazilian economy, as well as our business, results of operations and profitability.

Most of our revenues are linked to the real and a significant part of our operating expenses, such as fuel, certain aircraft lease agreements, certain flight hour maintenance contracts and aircraft insurance, are denominated in, or linked to, foreign currency. In addition, we have and may incur substantial amounts of U.S. dollar-denominated lease or financial obligations, fuel costs linked to the U.S. dollar and U.S. dollar-denominated indebtedness in the future or similar exposures to other foreign currencies. As of December 31, 2023, 2022, and 2021, 45.5%, 52.7% and 43.2% of our operating expenses, respectively, were denominated in, or linked to, foreign currency. Historically, we have been able to increase our fares and revenues to compensate for the impact from U.S. dollar appreciation on our expenses, but there is no assurance that we will continue to be able to do so.

In addition, largely as a result of the Russia-Ukraine conflict, Brent oil prices sharply increased from about US$75 per barrel at the end of 2021 to US$128 per barrel on March 8, 2022. As of December 31, 2023 and 2022, the Brent oil price was US$77.04 per barrel and US$80 per barrel, respectively, and there was significant volatility in Brent oil prices during 2022 and, to a lesser extent, during 2023. There is no assurance that Brent oil prices will not further increase in the future. In 2023, our U.S. dollar denominated operating expenses decreased 7.2 p.p, as compared to 2022, mainly as a result of the decrease in oil prices.


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We are not always fully hedged against fluctuations of the real. In light of the foregoing, there can be no assurance we will be able to protect ourselves against the effects of fluctuations of the real. Depreciation of the real could create inflationary pressures in Brazil and cause increases in interest rates, which could negatively affect the growth of the Brazilian economy as a whole, harm us, curtail access to financial markets and prompt government intervention, including recessionary governmental policies. Depreciation of the real can also, as in the context of the current global economic recovery, lead to decreased consumer spending, and reduced growth of the economy as a whole.

Any depreciation of the real against the U.S. dollar may have an adverse effect on us, including leading to a decrease in our profit margins or to operating losses caused by increases in U.S. dollar-denominated costs (including fuel costs), increases in interest expense or exchange losses on unhedged fixed obligations and indebtedness denominated in foreign currency.

Inflation and certain measures by the Brazilian government to curb inflation have historically adversely affected the Brazilian economy and Brazilian capital market, and high levels of inflation in the future would adversely affect us and the price of our preferred shares, including in the form of ADSs.

In the past, Brazil experienced extremely high rates of inflation. Inflation and some of the measures taken by the Brazilian government in an attempt to curb inflation have had significant negative effects on the Brazilian economy generally. Inflation, policies adopted to curb inflationary pressures and uncertainties regarding possible future governmental intervention have contributed to economic uncertainty and heightened volatility in the Brazilian capital markets.

According to the National Consumer Price Index (Índice Nacional de Preços ao Consumidor Amplo), or IPCA, Brazilian inflation rates were 4.6%, 5.8% and 10.1%, for the years 2023, 2022, and 2021, respectively. Brazil may experience high levels of inflation in the future and inflationary pressures may lead to the Brazilian government’s intervening in the economy and introducing policies that could adversely affect us and the price of our preferred shares, including in the form of ADSs. In the past, the Brazilian government’s interventions included the maintenance of a restrictive monetary policy with high interest rates that restricted credit availability and reduced economic growth, causing volatility in interest rates.

For example, the Monetary Policy Committee (Comitê de Política Monetária do Banco Central do Brasil), or COPOM, frequently adjusts interest rates in situations of economic uncertainty to achieve targets set in the Brazilian government’s economic policy. The SELIC (Sistema Especial de Liquidação e Custódia), the Central Bank’s overnight rate, as established by the COPOM increased from 10.00% at the beginning of 2014 to a high point of 14.25% in 2016 before a series of rate reductions in 2017, 2018 and 2019, bringing the SELIC rate down to 7.00% as of December 31, 2017, 6.50% as of December 31, 2018, to 4.50% as of December 31, 2019 and to 2.00% as of December 31, 2020. As of December 31, 2023, 2022 and 2021, the SELIC rate was 11.75%, 13.75% and 9.25%, respectively.

Conversely, more lenient government and Central Bank policies and interest rate decreases have triggered and may continue to trigger increases in inflation, and, consequently, growth volatility and the need for sudden and significant interest rate increases, which could negatively affect us and increase our indebtedness.

In the event that Brazil experiences high inflation in the future, we will attempt to adjust the prices we charge our passengers to offset the potential impacts of inflation on our expenses, including salaries as we have done in the past, but we may not be able to. This would lead to decreased net income, adversely affecting us. Inflationary pressures may also adversely affect our ability to access foreign financial markets, adversely affecting us.


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Developments and the perceptions of risks in other countries, including other emerging markets, the United States and Europe, and developments relating to the Russia-Ukraine conflict and relating to the conflict among Israel and militant groups in the Middle East (including Hamas), may adversely affect the Brazilian economy and the price of Brazilian securities, including the price of our preferred shares, including in the form of ADSs.

The market for securities issued by Brazilian companies is influenced by economic and market conditions in Brazil and, to varying degrees, market conditions in other Latin American and emerging markets, as well as the United States, Europe and other countries. To the extent the conditions of the global markets or economy deteriorate, Brazilian companies may have their businesses adversely affected. The weakness in the global economy has been marked by, among other adverse factors, lower levels of consumer and corporate confidence, decreased business investment and consumer spending, increased unemployment, reduced income and asset values, reduction of global growth rate, bank failures, persistent inflation, currency volatility and limited availability of credit and access to capital. The economic and market conditions of other countries, including the United States and European countries, and emerging markets, may affect the credit availability and the volume of foreign investments in Brazil and in the countries in which we do business, to varying degrees. The market turmoil generated by bank failures in the United States in March 2023, and the forced sale of Credit Suisse, are two such examples of the exposure that we have to international financial events. Developments or economic conditions in other emerging market countries have at times significantly affected the availability of credit to Brazilian companies and resulted in considerable outflows of funds from Brazil, decreasing the amount of foreign investments in Brazil, which impacted overall growth expectations for the Brazilian economy. Any of these factors could have a material adverse effect on our results of operations and financial condition.

Since 2020, Brexit has contributed to increased volatility and uncertainty in a number of financial markets. In addition, the crisis affecting emerging markets that began in the second quarter of 2018 as a result of the rise in interest rates by the U.S. Federal Reserve and the trade war between the United States and China, among other factors, could have an impact on the Brazilian economy.

Moreover, global developments relating to Russia’s invasion of Ukraine have (i) contributed to increases in the prices of energy, oil and other commodities, (ii) generated uncertainty in global capital markets, and the United States and European stock markets have seen increased price volatility, and (iii) forged a new landscape in relation to international sanctions. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, particularly if current or new sanctions continue for an extended period of time or if geopolitical tensions result in expanded military operations on a global scale. In addition, the Russia-Ukraine conflict, and the impact of sanctions against Russia and the potential for retaliatory acts from Russia, could result in increased cyberattacks.

In addition, the recent global tensions arising from the conflict among Israel and militant groups in the Middle East (including Hamas) has disrupted, and may continue to disrupt, the broader regional or global economic environment. Whilst we do not operate in the Middle East, the effects on our business and the duration and severity of the effects on global economy (including global supply chain disruptions, inflation, rising interest rates, and the imposition of sanctions) are inherently unpredictable.

We cannot predict how these developments will evolve and whether or to what extent they may affect Brazilian capital markets and, consequently, us.

Political risks remain mainly from the escalating war in Ukraine, the conflict among Israel and militant groups in the Middle East, medium-term relationship between the United States and China, uncertainty over government instabilities in Europe and other local geopolitical risks. The materialization of these risks may affect global growth and decrease investors’ interest in assets from Brazil and other countries in which we do business, which may materially and adversely affect the market price of our preferred shares, including in the form of ADSs, making it more difficult for us to access capital markets and, as a result, to finance our operations in the future.

Any further downgrading of Brazil’s credit rating could adversely affect the trading price of our preferred shares, including in the form of ADSs.

Brazil’s sovereign credit rating is currently rated below investment grade by the three main credit rating agencies. Consequently, the prices of securities issued by Brazilian companies have been negatively affected. A new Brazilian recession or continued political uncertainty, among other factors, could lead to further ratings downgrades.


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We can be adversely affected by investors’ perceptions of risks related to Brazil’s sovereign debt credit rating. Rating agencies regularly evaluate Brazil and its sovereign ratings, which are based on a number of factors including macroeconomic trends, fiscal and budgetary conditions, indebtedness metrics

AZUL SA [AZUL] Filings
20-F	[2024-05-16]
20-F	[2023-04-20]
20-F	[2022-05-02]
20-F	[2021-04-30]
20-F	[2020-04-30]
20-F	[2019-04-30]
20-F	[2018-04-27]
F-1	[2017-09-12]
F-1	[2017-02-06]
F-1	[2014-12-01]
F-1	[2013-05-28]