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The parties represented in Parliament will learn about TAP’s Restructuring Plan this Wednesday, after yesterday, Tuesday, December 8, the Government met in an extraordinary Council of Ministers, to debate and approve the document that will follow tomorrow. December 10 for Brussels, to assure the European Commission that TAP follows a sustainable route, so that the “institutional representatives” of TAP can begin the round of negotiations with the Commission that will mark the effective plan.
But the final document is expected to return to the Assembly of the Republic in February. The risk of TAP, which should benefit from additional funding never less than 1.6 billion euros, may be due to a lack of parliamentary political understanding, which may precipitate its closure, if it cannot be sustained under market conditions. . As the president of TAP, Miguel Frasquilho, had previously said to the workers of the TAP Group, the cuts that will be made in the national airline are intended to “prevent the end of TAP.”
As Luís Marques Mendes had anticipated in his weekly SIC comment, everything indicates that Prime Minister António Costa will proceed to Parliament with the TAP restructuring plan discussed in the extraordinary Council of Ministers that took place in the Palácio da Ajuda last Tuesday at night. on December 8 – which will mean additional financing that will exceed 1,600 million euros – for which it will be delivered this Wednesday, December 9 to the hemicycle parties by the Minister of Infrastructure and Housing, Pedro Nuno Santos, will travel to Brussels, in order to comply with the schedule agreed with the European Commission.
TAP’s current status was updated when the airline released its third-quarter results. In the accumulated result of the year, TAP transported 3.86 million passengers, which is compared to the 12.96 million passengers transported in the same period of 2019, that is, from January to September of the current year, TAP transported less 9, 09 million passengers, which corresponds to a drop of 70.2% directly related to international restrictions and the Covid-19 pandemic crisis.
The preparation of the TAP Restructuring Plan that will be presented to the European Commission until December 10 was carried out under the Management Committee “formally constituted” by President Miguel Frasquilho and by Ramiro Sequeira, “interim” CEO of TAP , together with the former CEO of the company. , Antonoaldo Neves. This Management Committee was made up of the lawyer Diogo Lacerda Machado and the CFO (Chief Financial Officer) Raffael Quintas, former CFO of the Brazilian airline Azul, brought to TAP by former shareholder David Neeleman. Miguel Frasquilho had previously announced that his advisor Miguel Malaquias Pereira was in charge of managing the Restructuring Plan project. TAP staff and unions highlighted the absence of aeronautical know-how in this Management Committee and, above all, of specialists who dominate TAP’s position in the market, although Miguel Frasquilho had guaranteed in the presentation of the first half results that the elaboration of the plan would be a transversal work “with the different teams of the company”.
Unions fear more than 3,000 exits
The president of TAP, Miguel Frasquilho and the “interim” CEO, Ramiro Sequeira, have already informed the TAP Workers Committee and the main unions that the Restructuring Plan of the national airline that will go to the European Commission will have a strong reduces workers, removing around 500 pilots, 750 crew members and 750 workers on the shoreline, in addition to the known non-renewal of fixed-term contracts, which according to information to which Jornal Economico had access, around 1600 workers, adding a 25% pay cut.
Several unions fear that the overall reduction in human resources of the TAP Group will exceed 3,000 workers, as JE had already mentioned. TAP sources also explained to the EB that, to date, there have been no layoffs in the company, with TAP proceeding exclusively to the non-renewal of fixed-term contracts. In this sense, the Company Agreements would be suspended, but the unions have already publicly stated that they do not accept that they are not informed of the criteria that will be used for the elimination of jobs.
It had also been explained to JE that the TAP Restructuring Plan is a requirement of the European Commission for anticipated state aid to the company, which is not exclusively due to the effects of the Covid-19 crisis -as is the case of the Lufthansa and Air-France-KLM cases – but they are lent to TAP after the company had previously reported losses (in 2019 the TAP Group recorded a loss of 105.6 million euros, of which -95, 6 million euros are attributable to TAP, SA), a loan from the State that will reach 1,200 million euros by the end of 2020, year in which the company saw the participation of the State increased to 72.5%, plus a guarantee A further € 500 million by 2021 Brussels must have explicit indications that TAP is economically viable in 2023 and sustainable in 2025 in order to repay the loans and assistance it has received in the meantime.
The EBITDA margin will have to grow more than 10 times
The same source explained to JE that Brussels needs a sustainable TAP Restructuring Plan, so the EBITDA margin could not remain as it is, requiring an adjustment of indicators that allow the EBITDA margin to grow more. 10 times. In fact, in the third quarter of 2020, EBITDA was negative, totaling -48.7 million euros, with a margin of -24.9%. For the time being, in the third quarter, TAP’s capacity cuts, “together with cost reduction measures, allowed us to reduce operating costs by 59% in the quarter (from 912.6 million euros in the third quarter of 2019, to 377.8 million in the third quarter of 2020), and in the first nine months operating costs were reduced by 41%, ”according to TAP data.
“The operating result (EBIT) for the third quarter of 2020 was -182.6 million euros, that is, 311.2 million less than in the third quarter of last year and in the first nine months, the operating result (EBIT ) stood at -610.2 million euros ”, while, as mentioned,“ EBITDA fell to -48.7 million in the third quarter, which corresponds to 305.2 million euros less than in the same period 2019 ”, says TAP. Thus, in the “accumulated for the year (from January to September) EBITDA stood at -172.9 million euros (when it had been 388.7 million in the same period of 2019)”, giving rise to the “net result negative amounts to -118.7 million euros in the third quarter, contributing to a negative net result of 700.6 million euros in the first nine months of 2020 ”. With these indicators, TAP sources had told JE that the reduction of workers would be inevitable, as well as the reduction of the company’s fleet, which would have to decrease from 108 aircraft, to 101 (which already happened in the third quarter) . then going to 94, until reaching 88 or 85 planes. At the end of 2019, the TAP Group employed 10,952 workers. In a statement to the workers, the president Miguel Frasquilho and the “interim” CEO Ramiro Sequeira explained that the management of TAP will have to carry out “a strong and transversal reduction in costs” to “avoid the end of TAP”.
According to the sources that explained the situation of TAP to the EB, this reduction in size would be essential to be able to increase the EBITDA margin to the desired levels in order to guarantee the sustainability of the airline so that the European Commission allows state aid to GRIFO. Only after the EBITDA margin has grown in the “desired and sustainable” proportion, will TAP be able to consider an increase in size, either in the number of aircraft in its fleet or in the number of workers.
The weight of TAP’s payroll is currently critical for the company, because it corresponds to approximately 7% of total costs, and it is essential that the State, which owns 72.5% of TAP, demonstrates to Brussels that TAP is viable and able to remain on the market without new state aid. This situation is not new, because the Portuguese airline had the same problem before and for several years it could not receive more state aid, and in reality TAP survived in that period without additional state aid.
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