Portugese Government Takes Majority Stake in TAP Air Portugal

Portugal’s government has agreed to pay €55 million ($62 million) to increase its stake in TAP Air Portugal, the national airline, to prevent the carrier from going bankrupt. The government will own a 72.5% stake in the airline, up from the 50% stake it’s held since partially privatizing the airline in 2015.

The government is purchasing a 22.5% stake back from David Neeleman, the Brazilian-American businessman who has founded five airlines, including JetBlue and Azul. Humberto Pedrosa, a Portuguese businessman who founded Atlantic Gateway to buy a stake in TAP in 2015 with Neeleman, still owns 22.5% of the airline, the airline’s employees hold 5%.

The Portuguese government will not run TAP but will instead seek “qualified, experienced and competent aviation managers” to run the company.

Portuguese Infrastructure minister Nuno Santos said that “the alternative [to buying a stake] was insolvency” since “the loss of TAP would go far beyond the effort that we will have to make to maintain it,” per FlightGlobal.

The purchase will also pave the way for a €1.2 billion state rescue loan for TAP, which was approved by the European Commission in June but has yet to be approved by the airline’s board. Since the government now has a majority vote in the airline, they can vote to accept the loan without contest.

“This €1.2 billion Portuguese rescue aid will help TAP Air Portugal face its liquidity needs and pave the way for its restructuring to ensure its long-term viability,” European Union Competition Chief Margrethe Vestager said when the bailout was first offered. “With the progressive lifting of travel restrictions and the upcoming touristic season, it also indirectly benefits the Portuguese tourism sector and economy as a whole. We continue working closely with Member States to find solutions to support companies in these difficult times in line with EU rules.”

“The state now takes 72.5% of the capital of the TAP group, ensuring control of the company,” states Portuguese finance minister Joao Leao. “In this way, it is possible to unblock the loan to TAP and avoid the bankruptcy of an essential company for the country.”

“[TAP Air Portugal] is too important for our country to let it fail,” Santos said, noting the impact the airline has on tourism, per ch-aviation. “It would be a disaster if we lost TAP.”

TAP has been renationalized on the heels of a €395 million ($443 million) Q1 loss. The airline has faced losses over the past few years, but the Coronavirus pandemic has heightened the challenges the airline is facing.

The airline faced substantial reductions in passenger counts. And while the airline did take delivery of three new aircraft – two Airbus A330neos and an Airbus A321neo – it has also seen six aircraft leave its fleet – five A320 family planes and an Embraer E190. As the crisis continues, the airline may phase out additional aircraft, especially as leases end and the carrier declines to extend them until passenger demand rebounds close to normal.