TAP 'finally' takes flight

TAP's future buyer will retain control of the airline; however, the State will be responsible for appointing directors to the board of directors and having a say in strategic decisions. "The Government's intention is to allow the investor to create synergies through a significant role in management and by requiring a broad majority between the State and the partner for critical decisions," said Infrastructure Minister Miguel Pinto Luz.

At issue is the approval of a decree-law that begins the process of reprivatizing TAP and in which it intends to sell, in a first phase, 49.9% of the airline's capital, through the direct sales model, reserving up to 5% for employees, as provided for in the privatization law.

Carlos Oliveira will be the airline's new CEO, but the rest of the board will remain in office.

According to government figures, the operation is expected to be completed in July of next year. According to the Prime Minister, the process safeguards the Lisbon hub and acknowledges that if the government's objectives are not met, it may be suspended without any compensation. The idea, according to Luís Montenegro, is for the company to be "profitable and well-managed, well-managed and within a context of being competitive, financially sustainable, and serving the country's strategic interests."

The Executive recalls that the minority sale in the first phase was the most common model in other successful privatizations, namely EDP and GALP, and says that the "model maximizes the value of the asset for the State," allowing for increased cash flow in a second phase, "safeguards positive externalities in other sectors," such as tourism, "alignment in the negotiation of Luís de Camões airport," and allows for offers from investors from outside the European Union.

To carry out this operation, the government will create a special monitoring committee, led by Daniel Traça. The remaining members will be appointed after the publication of a decree-law.

Evaluation criteria

According to the Government, proposals to be evaluated must meet three criteria: eligibility – suitability, autonomy, and financial robustness; airline of a significant size or consortium led by one (sector partners only); strategic – quality of the long-term industrial and strategic plan, including fleet growth and development plan at Luís de Camões Airport; development of other critical areas: investment in air operations in Porto and other airports, sustainable fuels, and maintenance and engineering; and vision for a second phase of privatization (subject to a separate process); industrial plan and valuation plan – including share exchange – and, finally, financial – immediate cash flow: price in euros offered for the shares and other forms of valuation, including performance bonuses, future appreciation of the remaining shares, dividends, and share exchanges.

Regarding timing, the first stage involves a pre-qualification process for interested parties, which will last 60 days, following the promulgation of the decree by the President of the Republic and its publication in the Official Gazette. This is followed by a phase of non-binding proposal submission within the following 90 days. The third stage is expected to see the submission of binding proposals, which will be evaluated by the Government within the next three months (90 days), only after which the negotiation phase begins. However, Pinto Luz admits that the negotiations could include "one, two, or three potential negotiators."

Reactions

The Socialist Party (PS) considers the option "appropriate" but has two requirements: that the shareholders' agreement does not jeopardize the conditions it requires the company to maintain, and that the money invested by the State in TAP during the pandemic be reimbursed to taxpayers.

"TAP must grow, and to grow, it needs to open itself up to international investors. That's why we believe this option is appropriate. We also believe that Portugal must maintain the majority of its shareholder structure, the majority of its capital, to ensure four primary objectives," said José Luís Carneiro.

In turn, Inês Sousa Real, leader of the PAN, spoke of the government's "stubbornness" and argued that it needed to explain its compensation. "We regret the insistence and stubbornness in this privatization because they are selling one of the country's most important assets. One day they will regret it, because if the rings are gone and the fingers remain, the government will have little left from a strategic standpoint to make Portugal more competitive and resilient," she attacked.

Meanwhile, Mário Amorim, a member of parliament for the Liberal Initiative, calls it a "disappointment." "If TAP continues to be unviable in the future, a new capital injection may be necessary," arguing that "TAP needs to be allowed to fly, to be free, without the burden of the State in the hold of the plane and, above all, without the defendants' money on the plane."

The Left Bloc is the party that opposes privatization. "There is no good reason to accept the privatization of TAP," said Mariana Mortágua, noting that the company is "one of the most important for the Portuguese economy and also for exports."

Livre asks: "Why such a rush?", with MP Jorge Pinto accusing: "While it's not surprising, it's a wrong decision. The government prefers to take the easy route: selling and absolving itself of responsibility in preparing a competitive TAP."

The PCP (Portuguese Communist Party) is talking about "economic crime." "We are dealing with one of the largest public companies, one of the largest national exporters, a lever for our economy and our business community, and a fundamental instrument for responding (...) to the tourism sector," argues Paulo Raimundo.

Finally, André Ventura says he will request an urgent debate in Parliament regarding the privatization of TAP, guaranteeing that this announcement came "by surprise" and "without consulting the major parties."

The Chega leader says that the TAP process was often "ruinous for taxpayers." However, he "will not be an obstacle to the partial privatization of TAP," but opposes "any deal that leads to a savage privatization."