TAP bailout could spell end for airline

The Portuguese union of Civil Aviation Pilots (SPAC) has issued a warning that the guidelines for the Government’s bailout for the airline are “inadequate” and will lead to the end of the company.

“The difficulties TAP is facing do not result from its own situation. They result from the drastic market change resulting from the Covid-19 pandemic, in the same way as it has affected other sectors,” states a communiqué from SPAC sent to parliamentary groups and reported by the news agency Lusa.
In June, the European Commission approved an emergency €1.2Bn cash injection for TAP, in line with the guidelines for the bailout and restructuring plan sent to Brussels, TAP being classified as “a company in difficulty”.
In the note from SPAC, it states that when the pandemic was declared, TAP had been operating “normally,” never imagining that the company, “without state intervention,” would be condemned “to disappear in the short or medium terms,” as stated in the relief and restructuring guidelines in the document, which “exist to prevent a non-competitive company getting state aid,” creating an unfair market imbalance.
These guidelines, say the unions, only allow Brussels to sanction Portuguese State aid if the companies involved “take measures to resolve the causes of their financial problems.”
Therefore, says the union, since the financial situation of the airline has been caused by the market situation (i.e. the pandemic) and the restructuring plan had been drawn up not “taking into consideration the company’s real situation (from Covid-19)” or “structural causes” which would have justified the support (the problem had not, they argue, been structural at all) and that the market situation had simply been chosen because “there hadn’t been time to deliver a plan”.
Instead, the union argues that applying the current guidelines will lead to the end of the company, making it less competitive in the face of a major downsizing in aircraft, routes, flights and scale and a change in its business model, leaving it without finance since the rules of ‘burden sharing’ which impose losses for shareholders and creditors, as well as restrictions on cash injections from the State, “will make it almost impossible to find (other) sources of financing”.
In the memorandum handed to the Portuguese MPs, the union argues that the solution now is to draw up a new rescue package for TAP to “put right the damage caused by extraordinary occurrences,” taking into account that Covid-19 (and not, in fact, any structural causes) are behind the airlines’s troubles, and which is “undoubtedly an extraordinary occurrence”.