The Portuguese Prime Minister, Antonio Costa, said today that TAP Air Portugal could be nationalized in the coming days. The statement comes after the spread of coronavirus has had a disastrous effect on the airline industry of Portugal. Privatization may be the only possible solution to save TAP, which is incredibly valuable to the Portuguese economy.
As reported by Reuters today, Antonio Costa said:
“We cannot exclude the need to nationalize TAP or other companies that are absolutely essential for the country. We cannot risk to lose them.“
It’s a wrap for TAP?
Since March 19th, TAP Air Portugal had planned to operate 11 international and four domestic destinations until the situation improved. These destinations included Sao Paulo (GRU), Newark (EWR), Toronto (YYZ), Boston (BOS), Miami (MIA) and six other European cities. Cumulatively, the airline had scheduled 25 weekly operations to these destinations, and additional 55 weekly services to four domestic cities.
However, in its latest update dated the 2nd of April, TAP has announced massive cuts to its initial plans. No flights to any of the South American (Rio de Janeiro, Sao Paulo) and North American (Newark, Toronto, Boston, Miami) destinations will now take place at least until the 17th of May.
The new planned schedule is as follows:
Flight operations till the 4th of May, all domestic:
- Lisbon – Funchal (FNC): 2x weekly
- Lisbon – Ponta Delgada (PDL): 3x weekly
- Lisbon – Terceira (TER): 1x weekly
Additional planned services starting 5th of May until the 17th of May:
- Lisbon – London(LHR): 2x weekly
- Lisbon – Paris(CDG/ORY): 2x weekly
The massive capacity and route cuts might reflect the serious implications that TAP Air Portugal is facing. The situation is so grave that TAP had recently announced its intentions to temporarily lay off around 90% of its employees. Hence, the nationalization of the airline might be imperative to its survival.
However, the change of TAP’s ownership is not something new. In June 2015, TAP Air Portugal had been semi-privatized and became a majority-owned by the Atlantic Gateway Consortium. The very next year, the new Portuguese government sought to return control of the airline to the state. In a new pact, the Portuguese government took 50% of the airline, Atlantic Gateway Consortium held 45%, and TAP’s employees took the remaining 5% of the airline’s ownership.
The current intention is to get full state control to help improve the weak financial position of TAP. Although there are more possible solutions for the same, nationalization seems the most feasible and effective. One other possibility is the transfer of ownership to other airlines.
In February, many reports were suggesting that there might be a joint takeover of TAP by German carrier Lufthansa and American carrier United. The plan actually looked practical, considering the fact that all three airlines are Star Alliance members.
Unfortunately, things didn’t go as expected due to an unanticipated arrival of the coronavirus. At a time when airlines are battling to survive, it is unlikely that any investments will be made. Hence, nationalization might be TAP’s only realistic solution.
Do you think TAP can overcome its problems? Let us know in the comments.