European Commission Approves €1.2 Billion TAP Air Portugal Bailout

Advertisement:

The European Commission has today approved the Portuguese government’s plan to bail out flag carrier TAP Air Portugal. The ruing made today in Brussels now paves the way for the Portuguese government to loan TAP Air Portugal €1.2 billion ($1.36 billion) to help it through the COVID crisis.

Tap Portugal EU Approval getty
TAP Air Portugal gets EU bailout approval on Portugal Day. Photo: Getty Images

Under the ruling, which happened to arrive on Portugals annual day of celebration, the rescue package is granted for a maximum of six months. During this time, TAP Air will be required to either reimburse the government or submit a restructuring plan.

TAP Air Portugal is crucial to Portugal

In a statement seen by Simple Flying, the Commission executive vice president Margrethe Vestager said,

“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.”

During the current coronavirus crisis, many airlines around the globe have had to ground their fleets and furlough staff to stay in business. With little or no revenue coming in, many airlines have turned to their governments for help.

tap-portugal-lisbon-airport-getty
TAP Air Portugal is vital to the Portuguese tourism industry. Photo: Getty Images

The Commission, which oversees competition policy within the European Union, approved the Portuguese government’s aid plan. The ruling came after learning how vital TAP Air Portugal was to the country’s tourism sector. The Commission decided that the loan complied with the European Union’s competition rules, despite the airline not qualifying for special treatment under the currently relaxed state aid rules.

Advertisement:

TAP Air Portugal is around €800 million in debt

According to the framework laid out regarding temporary emergency state aid, only companies in a sound financial position before the pandemic would be eligible for a less strict assessment. With Minister for Infrastructure Pedro Nuno Santos saying that TAP Air Portugal has debts of around €800 million ($910.48 million) and that the airline was facing difficulties before the December 2019 cut-off date.

TAP Air Portugal, Venezuela, Flight Ban
TAP Portugal has six months to pay back the government. Photo: Getty Images

What ultimately convinced the Commission to approve the loan was the Portuguese government’s insistence that it would get paid back. The Commission was told that if TAP Air Portugal had difficulty repaying the loan, it had six months to submit a restructuring plan. This appears to have been crucial in the decision making as the Commission only approves time-limited loans.

The aid package to TAP Portugal adds to a growing list of airlines looking to receive the European Union approved aid and could ultimately help Alitalia. The Italian national flag carrier was struggling before the coronavirus outbreak and in a much worse state than TAP Air Portugal.

Advertisement:

About TAP Air Portugal

TAP Air Portugal is a member of the Star Alliance and has a fleet of more than 100 planes, which it uses to transport passengers worldwide. Based at Lisbon Portela Airport (LIS) TAP Air Portugal is an essential element in the countries tourism sector accounting for more than 8% of Portugals GDP.

What do you think about TAP Air Portugal getting a €1.2 billion loan? Please let us know your thoughts in the comments.

Advertisement: