Econostrum | Economic News in the Mediterranean

European Commission approves €2.55bn state aid for TAP Air Portugal

Written by Eric Apim on Thursday, December 23rd 2021 à 15:40 | Read 304 times

TAP will be able to take off again more serenely (photo: H.Goussé/Airbus)
TAP will be able to take off again more serenely (photo: H.Goussé/Airbus)
PORTUGAL. The €2.55 billion state aid granted to the Transportes Aéreos Portugueses group and to the airline TAP Air Portugal was validated by the European Commission on Tuesday 22 December 2021. According to its assessment, and after an in-depth investigation, this support is "in line with EU rules, as it will bring Tap Air Portugal back to long-term viability without unduly affecting competition and trade". The case was notified by Portugal on 10 June 2021.

The decision also includes a €107.1m package paid by the Portuguese government to Tap Air Portugal to compensate it for damages suffered due to travel restrictions during the coronavirus pandemic between 1 July 2020 and 30 December 2020.

"The restructuring plan approved for TAP will ensure the long-term viability of the airline", commented Margrethe Vestager. According to the European Commission's executive vice-president in charge of competition policy, "the significant public support will be accompanied by safeguards to limit distortions of competition. In particular, TAP has committed to free up slots at the congested Lisbon airport, where it holds significant market power. This gives competing carriers the opportunity to expand their operations at this airport, ensuring fair prices and increased choice for European consumers."

Sale of non-core assets

The aid will take the form of equity or quasi-equity measures (capital injection or loan that can be converted into equity) thus amounting to €2.55bn, including the conversion of a €1.2bn rescue loan into equity re-approved on 16 July 2021 by the European Commission.

The restructuring plan foresees a split of the business between the airlines (Tap Air Portugal and Portugalia) and the non-core assets to be divested consisting of subsidiaries in the field of maintenance (Brazil), aircraft supply or ground operations. Tap Air Portugal and Portugalia will have to rationalise their network while waiting for a recovery in air traffic not expected before 2023. They will not only not be able to buy aircraft but will be forced to reduce their fleet.

Tap Air Portugal will also have to reduce its landing and take-off slots on the Lisbon tarmac in order to "maintain effective competition at this airport", says the European Commission. Eighteen slots per day will be released to another airline selected by the institution after a call for proposals launched before the IATA winter 2022-2023 season (30 October 2022 to 25 March 2023). "These measures will allow the sustainable entry or expansion of a competing carrier at this airport, to the benefit of consumers," the European Commission said.

TAP was renationalised on 2 July 2020 by Marcelo Rebelo de Sousa, the Portuguese Prime Minister. The government increased the state's share in the capital from 50 to 72.5% after private shareholders refused to accept its conditions in exchange for a loan. The company had been privatised in 2015 to 61%, and in 2016 the Portuguese state increased its stake to 50%.


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