Portugal Predicts TAP Will Need $2.4 Billion To Keep Flying

LISBON: Portugal expects airline TAP will need around 2 billion euros ($2.4 billion) in extra funds with state guarantees to cover its financing needs until 2024 under a restructuring plan.

Flag carrier TAP asked for state aid in April after suspending almost all of its 2,500 weekly flights at the height of the coronavirus crisis, which hit airlines globally.

The overhaul plan, which needs European Commission approval, was submitted on Thursday and envisages TAP would need to cut around 2,000 jobs by 2022 and introduce pay cuts of up to 25%.

It predicts the carrier, which lost 701 million euros in the first nine months of 2020 as the COVID-19 pandemic cut its passenger numbers by 70%, will reach breakeven in 2025.

If it is given the green light by Brussels, TAP could receive up to 1.17 billion euros of state aid in 2021 alone, Portugal’s Infrastructure Minister Pedro Nuno Santos said.

Santos said the financial support could go up to 2.5 billion euros but the government expected it to stay closer to 2 billion euros, confirming a Reuters report on Thursday.

“TAP’s restructuring plan is going to be tough … the plan is what needs to be done so the company is viable in the long term, and can survive and even grow in the future,” Santos said.

If Brussels rejects the plan, TAP would have to immediately repay a 1.2 billion euro rescue loan agreed earlier this year, which could lead to its insolvency.

Santos, who expects Brussels to approve the plan during the first three months of next year, said the pandemic had hit TAP hard that its problems had started some time before.

“TAP has 28% more crew members per aircraft than most of its competitors, which makes the adjustment we have to make more difficult now,” he said. “The pilots earn more than some of our competitors.”

The plan also projected cutting TAP’s fleet to 88 aircraft from just over 100.

Treasury Secretary Miguel Cruz said the 725 million euros of debt held by TAP’s bondholders “is an issue that is still being worked on” and the discussion of the plan with Brussels would be important to tackle the problem.

But Cruz did not mention whether the bonds would be subject to some haircuts or restructuring of maturities.

($1 = 0.8249 euros)

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