US court orders maintenance of fuel supply to Azul

The United States Justice Department issued an order on Monday, 24, to maintain the supply of fuel by Raízen to Azul , after the airline requested on Sunday to prevent Raízen from suspending the supply of fuel, according to a court document.

+Defaulting, Azul tries to stop interruption in fuel supply

In a letter dated June 18, Raízen, one of the largest aviation fuel distributors in Brazil, informed Azul that the trustee of the airline's 12th debenture issue, Vórtx, had communicated that the company had been in default on the payment of amortization and remuneration of the bond since June 12.

“Therefore, Raízen…requests an urgent statement from Azul regarding any possible resolution of the default and in a timely manner to avoid the suspension of supply, given the three-business-day deadline that Raízen has to implement the 'Stop Supply' mechanism,” stated the fuel distributor in the correspondence attached by Azul and delivered to the US courts, where its judicial recovery is ongoing.

Azul had stated in its request to the US court that Vórtx's action was “illegal” and that the interruption in the supply of fuel, if carried out, “puts at risk Azul's ability to successfully reorganize itself under judicial recovery”.

“The fiduciary agent’s action represents a violation of the terms of the judicial recovery,” said Azul.

In Monday's decision, the US court accepted Azul's request, preventing Raízen from interrupting the supply of fuel without first submitting a request to the court.

When contacted, Vórtx stated that it does not make any statements outside of official announcements to the market, while Raízen said it will not make any statements.

According to the text of the petition to the US Court, Azul claims that Raízen, a joint venture between Shell and the Cosan group, is responsible for around 68% of the airline's fuel needs on domestic routes and its infrastructure “is spread across dozens of airports where there are no viable alternatives”.

The airline further states in the document that even a brief interruption in supply would cause a “cascade of events of cancelled flights, grounded aircraft and irreparable reputational damage”.

Azul shares closed trading on Monday down 4.08%, quoted at R$0.94, while the Ibovespa closed down 0.41%.