Azul faces limited room to continue increasing fares amid persistent fuel cost pressure, according to three credit analysts.

The Brazilian airline has been raising fares since 2Q26, in an attempt to offset the surge in jet fuel prices and “will keep pushing to the limit” to make the most of the year-end holiday period, the first analyst said.

However, demand can pose a challenge for price elasticity, the three analysts said.

“Before long, people will prefer to make the Rio de Janeiro–São Paulo shuttle trip by car,” the first analyst said.

Many bookings were being made closer to the travel date, with leisure travelers adopting a “wait and see” approach, Azul president Abhi Shah said on the 2Q26 earnings call 14 August. At that time, more than 50% of Azul’s revenue was concentrated within a 21-day window, according to Shah. Bookings for September and for the 4Q26 were at a very low level – less than 20% of capacity.

The fare repricing takes time to reflect in the airline financials because the revenue is recognized when the passenger flies, not when the ticket is booked, Nicolás Giannone, senior desk analyst at Balanz UK, explained. This gap can exceed 100 days.

“So even if Azul repriced last quarter, you might not see any [impact] from that for the next 100 days or more,” Giannone said.

Azul’s 4Q26 results may show some improvement due to the increases in ticket prices and the holiday season, which is seasonally more favorable, the first analyst said.

Azul recorded EBITDA of BRL 510m (USD 97.7m) in 2Q26 and an EBITDA margin of 10.2%, according to its earnings. Total debt fell to BRL 21.4bn, following its emergence from a Chapter 11 process earlier this year. It reported BRL 3.7bn immediate liquidity at the end of 2Q26, with a net debt-to-EBITDA ratio of 2.8x, compared to a target of 1.5x by 2029.

Leverage going forward will depend on the pace of fare repricing and the fuel price trajectory, Giannone said. In his view, Azul still needs to recover 10-15 percentage points of EBITDA margin to break even.

“If there are no major changes in current price over cost trends, I would expect full year EBITDA to be between BRL 4.5bn and BRL 5bn and net leverage between 4.0x and 4.5x by year-end,” Giannone noted.

The big swing factor for Azul and the other airlines is Brazilian government support, according to the first analyst and Giannone.

Today (30 September), Azul received the first BRL 1.3bn tranche from Brazilian government development bank BNDES, under the National Civil Aviation Fund (FNAC) financing program. The remaining BRL 1.3bn of the five-year financing is expected to be available in 4Q26.

Azul also has BRL 2bn in three-year FGE/ABGF-backed fuel financing, according to its 2Q26 earnings presentation.

“This should give them some breathing room for two or three quarters,” Giannone said.

Given the pressure of fuel costs, the government should make more credit lines available next year, the first analyst said.

“Growth forecasts for next year aren’t anything to write home about; there’s pressure from fuel costs, and the overall outlook isn’t good,” the third analyst said. “At least the exchange rate is still at a comfortable level.”

A spokesperson at Azul declined to comment on the matter.

Azul’s USD 1.375bn 9.875% 2031 bond traded today at 83.07, according to MarketAxess.