Moody’s upgrades TAP

The US ratings agency Moody’s has raised the rating of Portuguese State-run airline TAP in the wake of its CEO Christine Ourmières-Widener having returned the airline from a loss to a profit of €65.6 million in 2022.

In a communiqué released today (Tuesday, 4 April) the agency up-ticked the group from B2 to B3, and its probability of default to B2-PD from B3-PD. It also upgraded its position as a shareholding of €375 million from B3 to B2.
The company’s base credit evaluation also improved from CAA1 to B3.
According to Moody’s, these improvements are down to “both the strong improvement in TAP’s operational profitability since the last improvement in April 2022, and a concomitant improvement in its credit metrics.”
TAP’s strong performance was driven by its leisure traveller client base, and its exposure to US, Canada and Brazil routes which were “in evidence this year”.
Moody’s highlighted improvements in available seat/kilometres indicators (ASK) and load factor which are situated at 87% and 80% respectively on the values in 2019.
ASK revenues were 21% above 2019, while control of costs was also praised by the ratings agency with costs down 2% on 2019 (despite the increased costs of jet fuel). The company’s EBITDA margin was 8.5% “well above the 2.9% margin in 2019”.
“Despite an inflationary environment and a weakening of the economy, the recovery of (TAPs) passenger traffic should continue. The trends for reservations continue to be positive both in volume and profitability”, says the agency, pointing out: “In line with the rest of the industry, TAP continues to experience an environment of robust prices” that has enabled it to overcome the high costs of fuel”.
TAP obtained a profit of €65.6 million in 2022, and informed in March that it had returned to positive results after losses of €1,600 million in 2021 and ahead of time, before the restructuring plan had even been completed.