Portrait: 10 numbers that illustrate the delicate situation that TAP lives in

The Covid-19 pandemic changed the fate of the Portuguese airline. The various scenarios on the table at this point point to the possibility of nationalization, as the Government has already warned, or to the departure of one of the company's private shareholders, David Neeleman. These 10 numbers help to understand the delicate situation that the air carrier lives.

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1 - The airline recorded 395 million losses in the first quarter, due to the Covid-19 pandemic, which worsened the airline's financial situation. In 2019, TAP recorded losses of 105,6 million euros, in line with the 118 million euros recorded in 2018. The loss recorded in 2019 is due to the “investment of more than 1,5 billion euros , including the purchase of 30 new aircraft that allowed the renewal of 70% of the long-haul fleet ”, justified the company.

2 - TAP has a total debt of 3,3 billion euros, as Minister Pedro Nuno Santos revealed in Parliament on May 19. This value divides into 2,3 billion euros of net financial debt and XNUMX billion euros related to debt derived from aircraft leasing contracts.
At the time, the official pointed out that the State's exposure to TAP's debt is around 200 million euros, pointing out that this exposure was reduced after the State renegotiated with the creditor banks.

3 - The European Commission approved a loan of 1.200 million euros from the Portuguese State to TAP on 10 June. This decision authorized the Portuguese Government to grant the loan subject to repayment after six months. If TAP does not pay, it must present a restructuring plan after six months.

On Tuesday, the Minister of Infrastructure revealed that the agreement proposed by the State to inject 1.200 million euros into the company had been failed on the company's board of directors, after the executive directors appointed by private shareholders abstained from voting, the which led to the lead of the proposal because it needs a qualified majority.

After the lead, Pedro Nuno Santos said that the Government would move forward with a proposal to private shareholders. "We are still going to submit the proposal to our private partner and wait for it to be accepted or else accept a proposal that finds an agreed solution to a negative situation for everyone, an solution that guarantees peace for TAP and avoids any future litigation," he said.

Regarding the negotiation of this restructuring plan, the chairman of the executive committee of TAP announced on June 23 that Brussels will adopt a “tough” stance with the company. "I expect nothing less than an extremely tough European Commission with TAP, I would prefer it to be different," said Antonoaldo Neves in Parliament today, pointing to other airlines that were forced to cut many routes through Brussels.

The manager warned at the time that the airline will not be able to repay the 1.200 million euro loan within six months. “We are unable to pay the debt in six months. No airline has taken out loans to pay for six months, ”he said.

“Do not doubt that the executive committee will not accept that the European Commission defines the fate of TAP. We will fight until the end so that the European Commission treats us like other airlines ”, warned Antonoaldo Neves at a hearing in Parliament on 23 June.

4 - TAP presented negative equity of 600 million euros at the end of 2019. This was in fact the reason why the European Commission rejected approving aid for TAP under the temporary framework, that is, the support provided by Brussels for the European airlines affected by the Covid-19 pandemic.

"TAP, which was experiencing difficulties even before the coronavirus outbreak (ie on December 31, 2019), was not eligible to receive support under the Commission's Temporary State Aid Framework," said a spokesman for the European Commission on 25 June.

A day earlier, the chairman of TAP's board of directors had guaranteed that Lisbon had defended the company's interests with Brussels. "It is evident that the State defended TAP's interests from the first to the last minute," argued Miguel Frasquilho on 25 June.

"The European Commission has TAP's accounts, looks at the balance sheet and sees a group that had 600 million negative equity at the end of 2019", then highlighted the manager in a hearing at the parliamentary economy committee.

“There is a whole history that leads to qualifying TAP as a group in difficulties, I don't see how we can be surprised. The European Commission considered TAP to be a company with difficulties ”, he pointed out.

“One of the essential requirements is that the company cannot be classified as a company in difficulty at the end of 2019. Several attempts were made to avoid restructuring”, he guaranteed.

The chairman of TAP admitted that the Portuguese State loan for 1,2 billion euros is "bulky", but pointed to the examples of other European airlines that will receive relevant support: Lufthansa, nine billion euros; Air France, seven billion; KLM, four billion.

5 - The company expects to reduce its fleet. TAP announced the departure of six planes (one A321, one A320, three A329 and one E190) that will end their contract this year. "In addition to these, additional aircraft exits are being studied in order to align with the fleet plan currently under review," the company recently announced.

The Portuguese airline had planned to reach the end of 2019 with 88 aircraft, but it surpassed this mark, reaching 105 aircraft. The chairman of TAP's board of directors recently rejected in Parliament the possibility that TAP was being "fattened".

“There was a growth in operational terms greater than that foreseen in the strategic plan. Unfortunately, there was no correspondence in terms of financial results ”, as foreseen in the“ business plan approved in 2017 ”, said Miguel Frasquilho on June 24 at a hearing in the parliamentary economy committee.

The topic of TAP airplanes was addressed by the supervising minister on May 19 in Parliament. At the time, Pedro Nuno Santos criticized the purchase of planes that were not planned. “The strategic plan was not followed by management. We have 15-17 more planes than was in the strategic plan, ”said the Minister of Infrastructure, quoted by Jornal de Negócios.

The minister then pointed out that the company's strategic plan was defined jointly between the private shareholders and the State, but that the State shareholder did not have “powers in aircraft leases”, with many of these being “leased to Azul, from our partner company, ”he said, referring to David Neeleman, founder of the Brazilian airline that holds 67% of the voting shares.

6 - TAP had 80% of its workers in a simplified layoff regime in June. The company announced on May 25 that it would maintain this regime in July, but did not yet know what percentage of workers would be affected by this measure this month. We had about 90% of workers in layoff in April, 85% in May, and 80% in June. We hope it will be less in July, ”said the chairman of the board of directors, Miguel Frasquilho on July 25 in Parliament.

The company closed 2019 with 10,6 thousand workers, two thousand more than in 2015, with costs with workers totaling 678,6 million euros, "placing TAP among the largest employers in the country", highlights the company. Of the total at the end of last year, 3.786 corresponded to cabin crew, and 1.535 pilots.

7 - TAP has been strongly investing in growth in the North American market in recent years. The United States weighed just 4% in the airline's sales ranking in 2014, ranking ninth. After five years, sales to the North American market rose to 13%, placing the USA in the third position. In this ranking, Portugal leads with 22% of sales, while Brazil occupies the second position with 19% of sales. Contributing to these expenses are passengers from North America, with TAP highlighting the positive effects of the Stopover program, which allows transatlantic passengers to stop in Lisbon or Porto for up to five days before heading to other European countries.

8 - TAP made a contribution of 3,5 billion euros to the Portuguese GDP in 2018, weighing 1,7% in the creation of wealth in the country that year. The data are from TAP itself, with this value including direct impacts, such as TAP's revenue and revenue from passenger tourism transported by TAP, as well as indirect impacts, such as on suppliers and employee consumption.

9 - TAP has increased the number of passengers in Porto by 50% since 2015. The number was advanced by the chairman of the executive committee, Antonoaldo Neves, in Parliament on 24 June. Between 2015 to 2019, TAP grew 50% in the number of passengers in Porto, totaling 25.614 flights and 2,448 million passengers. In comparison, the number of passengers between 2010 and 2014 grew by 2%. Not counting the flights of the air bridge between Lisbon and Porto, created in March 2016, TAP's passenger growth at Sá Carneiro airport was 30%.

10 - TAP paid premiums of 1,171 million euros to 180 of its workers in June 2019. The payment of the premium raised a lot of controversy with the Government harshly criticizing the executive committee for this decision.

“This is a management decision where we are not represented. It is not because there have been prizes in the past that there must be prizes in the future. TAP was told that we will not allow the awarding of prizes ”, said Pedro Nuno Santos in February in Parliament.

The Minister of Infrastructure stressed at the time that “in the past, we cannot forget that the awards were given to more than 10 workers”, which did not happen in 2019, relative to the 2018 financial year.

TAP recorded losses of 118 million euros in 2018 and the company approved that 180 workers receive prizes of close to 1,2 million euros, including two of 110 thousand euros attributed to two senior management.

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