TAP in bid to cancel plane leasing contract

 In News, TAP

Portugal’s State-owned airline ordered a legal opinion from the British law firm Norton Rose Fulbright, one of the largest in the world, because it wants to contest a leasing contract for 53 new Airbus aircraft.

The lease had been negotiated with the Toulouse-based aircraft manufacturer by its former private shareholder David Neeleman in 2020 because he believed they were more profitable in the long run for the company to fly on long haul destinations in the US, Canada, Africa and South America.
But now, liable to fork out potentially many tens of millions more for the NEO generation aircraft, TAP wants to get the contract overturned by an arbitration court in London reports the online news source ECO.
Norton Rose Fulbright delivered their legal report to TAP on September 7, concluding that it was possible for the “NEO Contracts” to be considered nul and void. The evaluation starts from the premise that it would be illegal under both Portuguese and European Union legislation as had been concluded by Serra Lopes Cortes Martins & Associados (SLCM).
SLCM argues that both Portuguese and European competition rules had been violated by the contract believing that there had existed an abuse of a dominant position by Airbus.
The order of the 15 A320 Neo, 25 A321 Neo and 14 A330-900 Neo extends to 2025 with 14 aircraft scheduled for delivery this year.
The purchase of 61% of TAP by the consortium Atlantic Gateway when TAP was privatised in 2015 involved the capitalisation by the private shareholders in the company of €226.75 million.
The money, however, used to invest in the capitalisation made by David Neeleman and Humberto Pedrosa came directly from Airbus and was transferred as an offset for the leasing deal for the 53 aircraft ordered by Neeleman from the manufacturer.
In other words, according to the lawyers, TAP was actually paying for its own capitalisation with the monies from Airbus, violating the Commercial Companies Code.
According to a study from the Irish consultancy Air, requested by TAP and delivered on 10 August 2022, the bill sent to TAP for the aircraft exceeded the amount paid by competitors for the same models by €254 million.
Portugal’s criminal investigation department DCIAP is carrying out an investigation based on the legal evaluations to determine if the capitalisation provided by the private shareholders at the time of the privatisation was in fact indirectly paid for by TAP (and not the capital shareholders) which, if found to be the case, is illegal.