BRASILIA (Reuters) - Brazil's government said on Friday it has reached deals with two of the country's largest airlines, Gol and Azul ( AZUL ), to settle some pending tax obligations totaling 7.5 billion reais ($1.22 billion).

The government has provided the carriers with significant discounts and allowed them to make installment payments.

WHY IT'S IMPORTANT

The deal may provide financial relief to the companies. Latin American airlines have been facing financial hurdles in the wake of the COVID-19 pandemic and were forced to restructure obligations as they struggle with high debt loads.

Gol has been under Chapter 11 bankruptcy protection in the U.S. since early 2024, while Azul ( AZUL ) recently struck deals with lessors to scrap obligations in exchange for an equity stake and bondholders to obtain fresh financing.

BY THE NUMBERS

Gol will pay 880 million reais in up to 120 installments to settle obligations of about 5 billion reais, the government said in a statement, adding that it would also retain 49 million reais from the firm currently deposited in a judicial account.

Azul ( AZUL ), meanwhile, will pay 36 million reais immediately and an additional 1.1 billion reais in up to 120 installments to settle more than 2.5 billion reais in debt.

KEY QUOTES

Mariana Vieira, an official in the office of Brazil's solicitor general, said the deals were a "significant step towards settling tax issues aggravated by the pandemic, and contribute to the resumption of growth in the industry."

Gol in a separate statement said the deal resolves tax liabilities and would not impact its net financial debt.

MARKET REACTION

Sao Paulo-traded shares of Gol were up 1.5% on Friday, adding to gains of more than 5% in the previous session, when the company provided a glimpse of the tax deal in a securities filing.

Azul ( AZUL ) shares were up 0.8%, following a rise of 2.8% on Thursday.

($1 = 6.1507 reais)