Despite strong opposition, Portuguese government approves TAP sale

The deal agreed back in June to sell a 61% stake in the country’s airline, TAP, to the American-Brazilian aviation tycoon David Neeleman and Portuguese bus company owner Humberto Pedrosa has been approved by the outgoing caretaker government, despite strong objections from the Socialist party. On Wednesday, just one day after the ousting of the centre-right government, the Socialist Party asked state holding company Parpublica to stop the privatization of TAP as it considered it imperative the state not lose control of the airline.
Isabel Castelo Branco, the Treasury Secretary, said the final agreement for the sale of a 61% stake in TAP would let them recapitalize the company sooner than initially agreed.
“The agreement for the conclusion of the sale allows to hasten the capitalization operation, with €150 million injected immediately, with another €120 million to be paid until June 2016,” she said, also stating that the investment was needed urgently.
The Socialists and their allies are looking to end many years of austerity and to reverse a number of previous privatizations. Left-wing politicians consider the decision to sell TAP as unlawful because the government only has caretaker status. However caretaker cabinet minister, Luis Marques Guedes, made it abundantly clear that the prospect of “imminent collapse at the treasury” of TAP made the final approval of the deal a pressing matter of state and therefore within the remit of the outgoing government.
The new owners of TAP has guaranteed to keep the airline’s management based in Portugal for ten years, to retain the Lisbon hub for a minimum of 30 years, and to continue with the frequently loss-making ‘strategic routes’ to Lusofile countries for ten years. Gateway, the company created by Neeleman for the purposes of acquiring TAP, will pay only €10 million for the stake, the intention being that the main burden of €1.2 billion of debt will rapidly be removed from the government’s ledger as debt in the troubled airline is reduced. The taxpayer will still own 35% of TAP which may have positive equity status one day.
The Gateway offer also provides guarantees on “job security” and the new management team will retain all agreements and understandings that have been reached with the workers, which will also include the one signed in December 2014 in order to avoid a Christmas and New Year strike. In addition the sale agreement forbids the new owners from executing collective redundancies while the taxpayer owns shares in the company, subject to a guaranteed minimum period of 30 months. (€1.00 = US$1.10 at time of publication.)