Brussels gives green light to €1.2Bn TAP injection

Brussels has given the Portuguese Government the green light go-ahead to inject up to €1.2Bn into national carrier TAP which is part-owned by Brazilian airline tycoon David Neeleman.

The EU Commission has done so because it says the emergency cash funding which will help restructure the ailing airline and keep its planes off the ground, will not distort the market.

The Government’s supplementary budget which was presented to parliament in Tuesday has set aside €946 million, although the total rescue package is estimated to reach around €1.2Bn.

The EC in a communiqué states, “This measure will provide TAP with the necessary resources to meet its immediate liquidity needs without causing single market distortion”.

The answer comes from a request by the Portuguese government to make a capital injection into the company after the most critical period of the pandemic. TAP announced this week that 70% of its routes will be operational by August.

TAP, like other international airlines, was forced to park almost all of its aircraft fleet because of Covid-19.

Now, like many of these airlines, it needs a capital injection to ensure its sustainability. The Secretary of State for the Treasury, Álvaro Novo says that TAP’s capital expenses include an already earmarked   sum of €946 million climbing to a maximum of €1.2Bn.

“This €1.2Bn will help TAP to meet its liquidity needs and pave the way for restructuring so as to guarantee the company’s long-term liability” says Margarethe Vestager, vice-president of the European Commission in a communiqué that lays down the criteria for the State help.

One stipulation is that the cash can only be granted for a period of six months to give TAP the time come up with solutions to the emergency situation.

“The Portuguese authorities have made a commitment that TAP will pay back the loan or present a restructuring plan within a period of six months to ensure its viability”. TAP is 51% owned by the State, with around 5% owned by the employees and the remainder in private hands through the Atlantic Gateway Consortium led by David Neeleman (founded by jetBlue Airways and Humberto Pedrosa, CEO of Barraqueiro.