Draft plan moots $2.4bn for TAP, thousands of job cuts

TAP Air Portugal (TP, Lisbon) may receive an additional EUR2 billion euro (USD2.4 billion) in public or state-guaranteed loans until 2024 if the European Commission approves a draft restructuring plan by the Portuguese government. The draft plan had to be submitted to Brussels on December 10. If rejected, TAP would have to immediately repay an earlier EUR1.2 billion (USD1.4 billion) rescue loan agreed to earlier this year, which could result in the airline’s insolvency, Reuters reported. The airline had asked for state aid in April after suspending almost all of its 2,500 weekly flights. TAP posted a net loss of EUR700.6 million (USD846.5 million) for the nine months ending September 2020. It closed 3Q20 with a net income loss of EUR118.7 million (USD 143.4 million), representing a 200% drop in income compared to 3Q19, citing as a reason the negative impact of COVID-19, which resulted in capacity and revenues cuts of 79% and 81% year-on-year, respectively. The restructuring plan, which was not made public, was approved by an extraordinary Council of Ministers earlier this week. Sources familiar with the document told Reuters the plan if approved, would see TAP break even in 2025. It would see state aid reach around EUR1 billion (USD1.2 billion) as early as next year, with further injections of EUR400 million (USD484 million) in 2022, and EUR300 million (USD363 million) in each of the following two years. Several news reports said the restructuring plan would see the airline, which had 10,000 employees in 2019, cut thousands of jobs, including up to 500 pilots. Salaries would be reduced by 25%, while temporary employment contracts would not be renewed. In its latest trading update, the airline confirmed that term agreements with 729 employees were not renewed from January to September 30; while working hours for all employees had been reduced up to 70%. The plan also projected a reduction of TAP’s fleet to less than 90 aircraft from the current 101 (including the regional fleet operated by Portugália Airlines (NI, Lisbon) and White (WI, Lisbon)) and the closure of about a quarter of its routes, Reuters said. In its trading update, the airline had indicated a rightsizing for post-COVID demand that would see the retirement of eight aircraft (two A320-200s and six A319-100s), substituted by one A321-200N and one A320-200N) that would join TAP’s fleet by the end of 2020.