SAO PAULO, Sept 13 (Reuters) - Brazilian airline Azul

has moved closer to clinching a new deal with lessors,

three people familiar with the talks said, as the company offers

them equity to pay off some $600 million in debt.

Shares in the carrier have slipped more than 40% since

August on media reports that Azul was considering filing for

Chapter 11 bankruptcy protection as it struggles with its debt

load. The company has said it is focused on direct talks with

creditors.

"There is momentum building towards a successful conclusion

of the out-of-court restructuring," one of the sources said,

adding that Azul and lessors met in New York in recent weeks.

Azul declined to comment on the negotiations.

The carrier told Reuters last month that Azul was not

considering Chapter 11 and would offer lessors an equity stake

to settle obligations that had been scheduled for payment over

three years.

The Brazilian airline has managed to avoid Chapter 11 even

as a number of Latin American carriers filed for bankruptcy

after the COVID-19 pandemic, including Aeromexico, Avianca,

LATAM and, most recently, local rival Gol.

The sources, who requested anonymity to discuss confidential

talks, said a majority of Azul's lessors have already signaled

they would agree to the plan on the table. Two of the people

said a deal could be signed within weeks.

Under the current framework, one of the sources said,

lessors would get an equity stake of around 20% of Azul.

"It is not 100% what Azul would like nor 100% what the

lessors would like, but can be a good way to relieve this

burden," one of the people said.

Azul struck a deal with lessors and equipment manufacturers

in 2023 to give them up to $570 million in preferred shares

valued at 36 reais ($6.46) each, part of a broader restructuring

that also delayed debt maturities and raised additional capital.

Azul's shares have dropped more than 70% so far

this year and now trade at around 4 reais, as the company has

struggled with a weaker exchange rate and disastrous flooding in

the key market of Porto Alegre, triggering the need for another

restructuring.

The new deal with lessors would also open the door to

raising fresh funds from bondholders, the sources said.

The company had previously said it could use its cargo unit

Azul Cargo as collateral for up to $800 million. Azul would

likely aim to raise $300 million to $400 million in a new

transaction, one of the sources said.

Azul has also been in talks with Gol's parent Abra Group to

"explore opportunities," amid speculation about a potential

tie-up. The two carriers announced a codeshare deal in May.

($1 = 5.5702 reais)