TAP continues investment despite government renationalisation plans

Portugal’s government generously has offered to share the management of former state airline TAP which it intends to renationalise.

The Gateway consortium, owned by Humberto Pedrosa and David Neeleman, purchased 61% of the almost bankrupt carrier in a deal that involved a small payment of €10 million to the Treasury and an undertaking to recapitalise the business.

The minister for planning and infrastructure, Pedro Marques, has informed parliament that the offer of sharing the management is on the table as negotiations continue to enable the state once again to have majority control of TAP.

The Passos Coelho coalition government rushed the sale through in the knowledge that the Socialist Party had pledged to renationalise the carrier if it came to power.

This left Gateway in the position of ploughing ahead with spending plans while having to negotiate with a Socialist administration intent on regaining control.

Marques talks now of the “importance of a private partner that can contribute to the capitalisation and management of TAP,” and of a reversion to the earlier model when the State owned TAP but did not meddle in its management, much.

This was the management model that saw TAP lurch from crisis to crisis, strike to strike, under a management that time and time again showed its inability to deal with labour relations and funding issues, leaving TAP strike prone and lacking a modern, efficient fleet.  

Neeleman and Pedrosa have little grounds for negotiation, a point that seems wasted on the government. The entrepreneurs have offered rather weakly that “the management is the most important thing” at TAP and are preparing themselves for some State-private business model where they do all the work and supply the capital, while the state benefits from that rare thing at TAP in recent years - profits.

Gateways’s reorganisation of TAP is cracking ahead anyway with unprofitable routes out of Oporto to Bucharest, Budapest, Gothenburg, Hanover and Zagreb already cut to predictable howls of anger from local business associations.

TAP also has announced significant changes taking place over the next two years with investments focusing on improving airline efficiency and passenger comfort with the addition of 53 new aircraft, a €60 million spend on cabin interiors, and €2 million for a new digital reservations platform.

'TAP Express' will be the replacing Portugália and will take delivery of eight ATR72 and nine Embraer 190s. The new TAP Express fleet will enable an increase in seat capacity of 47% and contribute to savings in fuel consumption.

TAP also has announced the creation of a Porto-Lisbon shuttle, connecting both destinations with hourly flights at peak times and is adding two new A330-200 aircraft to its long-haul fleet by June 2016 to increase connections to North America.

The airline’s intentions have been explained by Fernando Pinto, TAP chief executive, who commented, “TAP is making history these days, progressing step by step to become more competitive and efficient, a company able to meet its customers’ needs and expectations and strongly committed to delivering high quality services to Portugal and all the markets served,” all points that he failed to achieve when running the airline for the government.

Whether Pedrosa and Neeleman are wasting their time and management skills on reorganising and investing in an airline that will be wrested from their grasp by a Socialist government remains to be seen but they may end up running TAP largely for the benefit of the Portuguese state, which is not what they had in mind at all.

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