TAP Air Portugal To Get €2.5 Billion Following EU Green Light

Simple Flying

By Mark Finlay

Published Dec 22, 2021

LISBON, PORTUGAL - MAY 14: TAP - Air Portugal Airbus A330-941 airplane takes off from the Humberto Delgado International Airport on the day the government announced that British tourists will be allowed in the country as of May 17 during the COVID-19 Coronavirus pandemic on May 14, 2021 in Lisbon, Portugal. Portugal, a country heavily dependent on tourism, took this after-Brexit measure despite a ban established by the European Union on non-essential travel from countries outside it. British tourists will have to present evidence of a negative PCR COVID-19 test taken 72 hours before their arrival. (Photo by Horacio Villalobos#Corbis/Corbis via Getty Images)

Under the EU State aid rules, the European Commission has approved €2.55 billion ($2.88 billion) in aid for struggling Portuguese national flag carrier TAP Air Portugal. A statement out of Brussels today says that the financial aid will allow the Lisbon Portela Airport (LIS)-based airline to restructure and return to viability.

On top of the financial aid for restructuring, TAP Air Portugal will also receive €1.07 million ($1.21 million) in compensation due to losses caused by the coronavirus between July 1, 2020, and December 30, 2020. Before approving the financial aid, the Commission assessed the restructuring plan, which will see TAP Air Portugal banned from making further acquisitions as it reduces its fleet size and streamlines its route network.

TAP Air Portugal needed the aid to survive

A week earlier, when speaking about TAP Air Portugal, the Minister of Infrastructure and Housing, Pedro Nuno Santos, said that the financial aid was necessary for the airline to survive. He said that if Brussels did not approve the plan, Portugal would see its place in the world shrink as airlines would prefer to fly to Madrid over Lisbon. According to the website, The Portuguese News, Nuno Santos said:

"We are talking about the only airline operating in Portugal that has a hub, which makes intercontinental trips between Brazil, USA, Africa, and Portugal and distributes to the rest of Europe." He added, "Without TAP Portugal, the nation will see its airline hub moved to Madrid."

TAP portugal — TAP is the dominant airline at Lisbon's Portela Airport (LIS).Photo: Getty Images

Because of TAP Air Portugal's significant presence at Lisbon Portela Airport (LIS) and its inability to expand, airlines who want to fly to Lisbon cannot because of a lack of takeoff and landing slots. The EU Commission is aware of this and made TAP Air Portugal give up 18 of its daily slots to rival airlines, one of the conditions attached to the financial aid.

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Consumers will have more choices when flying to Lisbon

When speaking about the aid package in the EU statement Executive Vice-President Margrethe Vestager, in charge of competition policy, said:

"The measures we approved today will enable Portugal to compensate TAP for damages directly suffered as a result of travel restrictions put in place to limit the spread of the coronavirus. At the same time, the approved restructuring plan for TAP will ensure the airline's path towards long-term viability. The significant public support will come with safeguards to limit distortions of competition. In particular, TAP has committed to making available slots at the congested Lisbon airport, where TAP holds significant market power. This gives competing carriers the chance to expand their activities at this airport, ensuring fair prices and increased choice for European consumers."

About TAP Air Portugal

TAP Air Portugal is the largest airline in Portugal and the primary operator in and out of Lisbon Portela Airport (LIS). TAP Air Portugal flies to destinations on the Portuguese mainland and the autonomous islands of Madeira and the Azores. Along with intercity flights within Europe, TAP Air Portugal links the Portuguese-speaking nations in Africa and South America with Europe. TAP Air Portugal also plays a vital role in the growth of the Portuguese tourism industry and is one of the nation's largest employers.

What do you think about the EU financial aid package for TAP Air Portugal? Please tell us what you think in the comments.