The Portuguese government has officially put its flag carrier, Transportes Aéreos Portugueses (TAP), up for sale. Currently wholly owned by the government, TAP’s privatization has garnered both support and criticism across the industry. The government seeks to sell at least 51% of its capital, Portugal’s Minister of Finance, Fernando Medina, announced on Thursday.
TAP’s Financial History
TAP has had a troubled financial history, further accelerated by the collapse in demand thanks to the Pandemic. In December 2020, the European Commission approved a €1.2 billion government loan to assist in restructuring. As a result of the restructuring, TAP would wave goodbye to at least 2,000 members of staff and at least a dozen aircraft. The remaining staff members would be hit with a pay cut of 25%.
In 2021, TAP received a cash injection of €463 million from the Portuguese Government while the previous loan was approved. Following the plan, TAP swung to a net profit of 22.9 million euros, compared to a 202 million loss earlier last year. Notably, this was the first time the carrier has achieved a net profit since 2017.
CEO Voices Support In Privatization For Flag Carrier
The Portuguese government hopes to have approved the full privatization dossier, including terms and requirements, by the end of 2023 – or, at the very latest, the beginning of 2024. The process will ideally be concluded in mid-2024.
Luís Rodrigues, CEO and Chairman of the Board of Directors at TAP, supported the decision on Wednesday. Mr Rodrigues added that he believed the process of selling would go smoothly.
Also, Mr Rodrigues, President and CEO of SATA Group, a regional airline in the Azores archipelago, was appointed CEO of TAP in April 2023. Previously, in 2009, he served as an Executive Board Member for the airline, involved in restructuring and development initiatives in Portugal and Brazil.
Emirates President Predicts a “Bidding War” For TAP
President of Emirates, Tim Clark, verified that while he had no interest in acquiring the airline, he predicted that European Airline Giants would engage in a “Bidding War” for TAP. As predicted, German Airline Lufthansa has expressed interest in purchasing part of TAP’s capital. Likewise, Luis Gallego, CEO of the International Airlines Group, stated that “seria algo interessante” (“it would be something interesting”) to obtain TAP.
On Thursday, Mr Medina pointed out the airline’s connection to Portuguese-speaking regions, like Brazil, Mozambique and Angola, as a major selling factor. It was the airline’s lucrative connections to South America, he argued, that would attract major European carriers. Thus far, the carrier has flown over 1 million customers between Brazil and Portugal this year alone.
The decision has, however, received criticism from the Portuguese Union of Airport, Maintenance and Aviation Workers, or STAMA. STAMA “não vê com bons olhos” (“does not look favourably”) upon the government’s decision to privatize the airline. Perhaps fearing a repeat of the 2020 restructuring plan that implemented a pay cut of 25%, not all employees do not share the opinion of TAP’s CEO.
What do you think about this news? Do you think privatization is the way for TAP to thrive? Let us know in the comments!