TAP will struggle to succeed alone, consolidation likely, minister says

Credit: REUTERS/Regis Duvignau

By Sergio Goncalves

July 15 (Reuters) - Portugal's flag carrier TAP is unlikely to succeed alone and must be open to consolidation with other airlines in the medium term, the country's infrastructure minister said in an interview with Reuters on Wednesday.

The government sealed a deal on July 2 with the company's private shareholders to increase its 50% stake to 72.5%, avoiding a full-scale nationalisation.

But infrastructure minister Pedro Nuno Santos said the government did not exclude that in the future TAP could reopen its capital to other airlines and that consolidation could happen in the medium and long term.

"It is difficult for TAP to succeed in thisglobal marketalone," Nuno Santos said.

"TAP was coveted by several very important airlines in the aviation sector, namely Lufthansa LHAG.DE, but it was not the only one," he said, referring to the situation before the pandemic.

TAP, which reported losses of 395 million euros ($450.81 million) for the first quarter of 2020, asked for state aid in April after suspending almost all flights and laying off 90% of staff.

The European Commission approved a 1.2 billion euro rescue loan in June, contingent on the company drawing up a restructuring plan within six months.

The loan should ensure the company has liquidity until the end of February 2021, the minister said, with the first payment of 250 million euros due by next week.

"TAP will have to reduce routes, personnel costs, number of planes," Nuno Santos said.

Separately, the minister said it would be a "win-win" for Portugal, Europe and the United States if American companies entered the race to expand Portugal's deepwater port of Sines, already attracting interest from companies in Asia, northern Europe and the Middle East.

"Europe depends on gas from some geographies and it would be very important for us to be able to diversify. Obviously it would be win-win for the USA, for Portugal and for Europe if we could get North American (LNG) gas to enter through Portugal," he said.

"We would like United States to look more at Europe and Portugal as territories for their investments."

($1 = 0.8762 euros)

(By Sérgio Gonçalves, Editing by Victoria Waldersee and Jane Merriman)

((sergio.goncalves@thomsonreuters.com; +351213509204; Reuters Messaging: sergio.goncalves.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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