Azul-Gol airline merger could be a 'necessary evil' in bumpy Brazil market

A plan to merge two of Brazil's top airlines to create a dominant carrier will likely win regulatory approval as a government push for a financially healthy sector outweighs concern about restricted competition, experts and lawyers told Reuters. A floated combination of Gol and Azul, formalized with a memorandum of understanding last week, would give the new firm overwhelming control over the country's domestic market. But both have faced financial turbulence since the pandemic, along with Brazil's current No. 1 carrier, LATAM Airlines' local unit. Costs remain high and air travel remains restricted in Latin America's largest nation and top economy. The cocktail of factors - and support from the administration of President Luis Inacio Lula da Silva - means that the merger process, while likely to face some pushback, is likely to proceed. "The impact (of the merger) needs to be thought about in the context of what the alternative is," said Andre Castellini, a senior partner at Bain & Company. "It's a necessary evil." Airlines in Brazil are hit by high taxes, strict consumer protections and face headwinds with the recent weakening of the Brazilian real against the U.S. dollar - used for expenses such as jet fuel and aircraft leasing contracts - said Nicole Villa, a lawyer specialized in aviation law.<br/>