Fuel Shock Meets Disciplined Recovery: Abra Group's Balancing Act

A Fuel Shock, A Strategy

When the Middle East conflict flared, high fuel costs immediately became the market's top concern. For the newly consolidated Abra Group — parent of GOL, Avianca, and Wamos, and now the second-largest airline group in Latin America — the timing could not be more delicate. GOL had only emerged from Chapter 11 in June 2025, and the group had been banking on a smooth capacity ramp fueled by unit-revenue discipline. Instead, management now faces a jet-fuel price that spiked nearly 55% in Brazil in April alone, according to CFO Manuel Irarrazaval.

The group's response has been a familiar playbook: hedge first, pass through pricing, and lean on the flexibility of a newly integrated network. Irarrazaval outlined the hedges in the Q&A: “we have hedged 50% of our fuel needs for the months between March and May... with a call strike at $2.45... and we have increased that hedging recently with another 14% of the fuel needs until the end of August” — Manuel Irarrazaval, Chief Financial Officer · 2026-03-31 — a protective measure taken, as he put it, "right before the war started."

CEO Adrian Neuhauser framed the pricing challenge as a delayed pass-through, not a demand collapse. In Brazil, fares have already risen about 30% from a month ago, effectively a full pass-through of mid-4 fuel. But the mix of bookings sold earlier at lower prices means the average fare will take "the better part of 3 months" to catch up. He emphasized the elasticity concern is real but less about price than income: “We are monitoring economic slowdowns and then income elasticity, right? Because that would have a much more significant impact, we believe, on demand than the fare pricing that we're passing through” — Adrian Neuhauser, Chief Executive Officer · 2026-03-31. The near-term booking curve is holding up, but longer-dated (high-season) bookings are soft, prompting talk of tactical reductions in capacity.

If you have to think about what are we monitoring more long term, we're monitoring economic slowdowns and then income elasticity, right? Because that would have a much more significant impact, we believe, on demand than the fare pricing that we're passing through.

The Balancing Act: Pricing, Capacity, and Leverage

GOL's post-emergence track record gave management some credibility to make these calls. In the prior call (Nov 2025), Celso Ferrer, CEO of GOL, had said the third quarter came "ahead of our expectations" and that the results reflected “a very solid demand and a great execution by our team” — Celso Ferrer, CEO · 2025-11-12. He had also stressed that “the execution has been well done” — Celso Ferrer, CEO · 2025-11-12 on unit revenue versus cost. That momentum continues even as fuel costs surge. The group reported pro forma adjusted EBITDAR of $2.7 billion for 2025, a 26% year-over-year increase, with a 27.4% margin — a 300-basis-point expansion. Net leverage fell to 3.3x from 5x a year earlier, helped by GOL's restructuring and strong cash generation. Liquidity sits at $2.5 billion, about 25% of LTM revenue.

But the fuel shock tests that discipline. On the Avianca side, pass-through has been less effective — only ~10% price increases versus the mid-20s needed — because competitors in Europe and the U.S. are slower to raise fares, often hedged themselves. As Neuhauser put it, "The nature of the network means that you've got different competitive sets." In the short term, the group is pulling levers it designed during the restructuring: redeploying capacity from weaker international routes back into Brazil's strong domestic hubs like Rio and Salvador, and using the group's scale to negotiate better fuel deals. Ferrer noted that GOL is "monitoring close" and has already made “some adjustments so far” — Celso Ferrer, Chief Executive Officer · 2026-03-31, but no wholesale cuts. GOL's Fuel price exposure is partially buffered by the Petrobras pass-through mechanism, which lags world prices by a month, giving airlines time to adjust pricing.

The deeper question is whether this is a temporary shock or a new regime. Management is clearly hedging against the latter. The previous calls, particularly the 2023 era, were dominated by operational recovery from the pandemic — fleet utilization, CASK reductions, and balance sheet repairs. Today, the language has shifted to fuel-indexed capacity management and price elasticity. The strategic vocabulary is also more sophisticated: Abra is now actively coordinating procurement, loyalty programs, and network planning across three carriers to offset the cost pressure.

For all the hedging, the group remains sensitive to a demand hit. As Ferrer noted in the prior call's Q3, "the execution has been well done" but the environment under a prolonged conflict could easily flip the script. GOL's own shares have been volatile, reflecting the sector's exposure to oil. The company's price tape shows a significant drawdown from its post-emergence peak, though it has stabilized in the last 90 days.

The next few months will be the real test. Summer high season bookings are holding up, but the long-haul international markets — particularly Avianca's Europe routes — remain vulnerable to a demand pullback. The group's ability to maintain unit revenue while absorbing fuel costs will determine whether it can sustain the margin improvements that took it to a 30% EBITDAR margin in Q4 2025.