The tap closed. On December 27, TAP received the last injection of EUR 990 million, included in the restructuring plan approved by the European Commission, representing a total of EUR 3.2 billion in public support. From now on, the state is forbidden to lend more money to the company and that is precisely why privatization is urgent for the socialist executive.
The past 12 months have been filled with controversy, labor disputes and management stumbles – the latest in this latter part of the year, with the news that former manager Alexandra Reis had been paid €500,000 in compensation for leaving the company in February , months later she was named president of NAV and became secretary of state for finance at the beginning of this month.
Thus, 2022 will come to an end with no house in order and if the company’s management and government do not take the reins, greater challenges may foresee in the coming months. António Costa has already set the timetable for the sale of the carrier and confirmed his intention to complete the privatization of TAP in 12 months and close the case by the end of 2023. And Pedro Nuno Santos assured this month that there are still no ongoing negotiations, but that the green light has already been given to potential interested parties. “There is an intention from the government to open up the company’s capital and this intention has already been signaled to the market,” said the Minister of Infrastructure and Housing at a hearing in the House of Representatives. But there are still huge doubts and challenges overshadowing TAP’s future.
Time is money
The calendar raises doubts whether the government will be able to find a good deal for TAP in such a short time. The saying goes: “quick and good, there is no one”, and past experiences in the privatization dossier increase fears of progress and setbacks. The timing announced by the executive raises fears of a sell-out and António Costa has already admitted that the government could even lose money.
What is certain is that it will not be possible to recover the 3.2 billion euros injected into the company with the signing of the contract. But the urgency to turn TAP over to the private sector could prove dangerous and lead to the carrier being sold at a bargain price.
The interested
“We have several interested parties in TAP and we think it is important that TAP is not left to its own devices,” said the minister in charge of the public company in March. There are no official confirmations yet, but three names are on the table as potential investors: the German Lufthansa, the French-Dutch Air France-KLM and the IAG group, owner of the Spanish Iberia and British Airways.
At DN/Dinheiro Vivo, only the former is interested in looking at the national carrier. “As indicated [o CEO] Ben Smith in October, TAP could be an option,” echoed a source from the airline group, who declined to provide further details. The IAG points out that the company’s current priority is to finalize its purchase of Spain’s Air Europa, and Lufthansa refuses to comment on “speculation”.
Full or partial sale?
Another question that remains is António Costa’s intention in this chapter, but the expectation is that the government will want to keep a foothold in the company, even if it chooses to sell most of the capital. After the historic injection into the company’s treasury of government money and given the threat of an unfortunate case for the state, the delivery of the largest piece on a scale to a foreign group could be a bucket of cold water for the taxpayer. But the government has already admitted this hypothesis. “We have no prejudices on this issue. We must ensure the long-term sustainability of TAP, the hub in Portugal, the Portuguese TAP operating from here, with autonomous management. The form, we will soon see what it will be”, reported the Minister of Infrastructure in March.
tidy up the house
Before the hot potato is handed over to its future owners, TAP and the government still have a number of problems to solve. The main one respects social peace, which has been pushed aside in recent months. After the pilots’ protest marches in the summer, disagreements with the crew led to a two-day strike in December – the company’s first strikes in eight years. And today, the National Union of Civil Aviation Flight Personnel (SNPVAC) is meeting in an emergency meeting to decide whether to go on strike for another five days in January.
New Company Agreement (EA) negotiations are at the root of the problem; workers want to resume wages ahead of temporary emergency agreements, but TAP plans to honor the document signed with Brussels until 2025. “Our limit is the emergency agreement and it is a limit that we will not be able to exceed,” says Christine Ourmières-Verbreder this month. The CEO rules out a wage change and the employees, given the resumption of activities, demand that the conditions be updated. TAP will have to find a solution to resolve the battle and present a company without internal wars to the market.
Threats to the operation
The risks are diverse and exist on multiple fronts. The rise in the price of jet fuel is one of the worrying factors weighing on TAP’s fragile treasury and without much financial strength. Until September alone, fuel prices rose 292%, costing the company €781 million – three times what it was in 2021. Inflation suggests an even worse scenario in 2023.
Competition from low-cost companies in short- and medium-haul destinations is another major threat. With ever-faster growth at key Portuguese airports and competitive pricing, low-cost airlines are taking business away from TAP. easyJet took over the flag carrier’s 18 slots – one of Brussels’ remedies to give the green light to state aid – and is betting on new routes and destinations. The poor punctuality, the successive cancellations that dominated the summer and now the end of the year and the lackluster customer service are other factors that take away from competitiveness.
The future
The coming years of TAP are surrounded by a scenario of enormous uncertainty. It is necessary to restore calm in the company and to reach an agreement with the workers. It is mandatory to strictly comply with the Brussels targets and keep the accounts – this year TAP must not have a loss of more than 54 million euros. The sale of Cateringpor and Groundfoce has yet to be completed. The move of the company’s headquarters is on the to-do list, but it is not known when it will happen. The sale of the company could go ahead next year and represent a turnaround for management. Everything is open.
Rute Simão is a journalist for Dinheiro Vivo
Source: DN
