SAO PAULO, Feb 21 (Reuters) - Brazilian airline Azul's ( AZUL )

board of directors has approved a capital increase as

part of an out-of-court restructuring that gave lessors equity

in lieu of nearly $550 million in obligations, the company said

late on Thursday.

The capital increase of up to 3.37 billion reais ($591

million) came through the issuance of new shares, Azul ( AZUL ) said in a

securities filing, with fresh investment from controlling

shareholder David Neeleman, a serial aviation entrepreneur who

also founded U.S. airline JetBlue ( JBLU ).

Neeleman currently holds 67% of Azul's ( AZUL ) voting shares, with

the other 33% being held by shareholders of Trip, an airline

Azul ( AZUL ) acquired in the early 2010s. He is expected to lose control

of the firm as part of the restructuring, but remain a major

shareholder.

In addition to the equity swap with lessors and an agreement

with bondholders for fresh financing, Azul ( AZUL ) is eyeing a potential

tie-up with rival Brazilian airline Gol.

($1 = 5.7022 reais)