TAP financial boss explains why Q1 results €79.9 million in the red

 In Aviation, News, TAP

Portuguese airline TAP suffered losses of €79.9 million for the first quarter of 2024 and €26.2 million for the last quarter of 2023 but enjoyed a record result for last year overall of €177 million.

However, the airline’s CFO, Gonçalo Pires attended a parliamentary hearing of the Commission of the Economy, Public Works and Housing on Tuesday to give an account of the losses the company suffered in Q4 of 2023 and Q1 of 2024 at the request of far-right party Chega and the centre-right party PSD.

Pires said that usually the second and third quarters of the year were “positive” and justified the poor results of the previous two quarters on increases in staff costs.

The CFO said that TAP had signed new company agreements in the last six months that had placed an additional financial burden on the company and pointed to a “seasonal effect” behind the poor results.

“Airline companies sell a lot (of tickets) in the first months of the year, but the months when passengers most fly are between April and October and are concentrated in June, July and August”, he said.

However, he said that these revenues from ticket sales are only accounted for the period in which the flights take place, not at the time of sale.

TAP’s losses were down to an increase in staff costs because salary cuts imposed following the pandemic were reversed with salaries being reinstated. Costs on salaries also went up because of new conditions agreed with the unions.

Gonçalo Pires was also quizzed about the payment to TAP pilots of six additional salaries because TAP used Portugália to undertake TAP replacement flights, according to the news source Expresso.

This had been an obligation that had arisen because of the renegotiation of a company contract signed with the pilots that meant an upfront payment of the salaries, but would work out as a “saving in the long term”.

Pires confirmed that TAP had received an instruction from the Ministry of Finances to cut the costs implicit in the agreements.

“We are on top of the budget right now” said the CFO, adding that there were “budgetary items that were slightly over budget, and others that would “offset” these overruns and “permit the budget to be met”.

Gonçalo Pires also pointed to “inherited problems” that could not be resolved with the restructuring plan, such as the costs of buying new Airbus NEO long-range aircraft.

“In the past and for the future that is the case because TAP has a very expensive fleet. It has to do with purchase agreements because the (new) planes are more expensive and were all purchased at the same time and financed at the same time at much higher costs”, he said.

TAP is under contract for the acquisition of new aircraft purchased in 2015 by David Neeleman from Airbus from which TAP had received funds for a capital injection made by the private company running the airline at the time, Atlantic Gateway as part of TAP’s privatisation.