** Shares in Brazilian airlines Azul AZUL4.SA and Gol GOLL4.SA rise after local media reported they were moving closer to a potential merger

** Newspaper Valor Economico says Azul and Gol's parent Abra Group are expected to sign a memorandum of understanding in the coming weeks stressing the intention to merge

** Shares in Azul rise more than 6%, while Gol's shares jump 18%

** Azul and Abra have been in talks to "explore opportunities" since mid-2024, following the announcement of a codeshare deal between the two carriers

** Gol and Azul are two of Brazil's largest airlines, dominating the market along with the local unit of Chile-based LATAM Airlines LTM.SN

** Gol is under Chapter 11 bankruptcy protection in the U.S.

** "The deal looks complex, especially regarding regulatory approvals, capital needs, and governance," analysts at BTG Pactual say

** "However, sharp valuation declines post-COVID and recent FX stress may have provided the driving force for it to move onwards," they note

(Reporting by Gabriel Araujo; Editing by Paul Simao)

((Gabriel.Araujo2@thomsonreuters.com; +55 11 5047-3352;))