(Bloomberg) -- Portugal’s supplementary budget for 2020 includes as much as 1.2 billion euros ($1.4 billion) in aid for TAP SGPS SA after the airline had to suspend most of its operations due to the coronavirus outbreak.
The process to provide aid for TAP hasn’t been concluded yet, Secretary of State for Treasury Alvaro Novo told reporters at a press conference in Lisbon on Tuesday night. The government has already sent a request for state aid approval to the European Commission, which should take a decision this week, according to Novo.Portugal has previously said it won’t let its national flag-carrier collapse and won’t rule out any instruments it can use to intervene. The government already controls 50% of TAP. Airline entrepreneur David Neeleman and Portuguese investor Humberto Pedrosa jointly own another 45% through the Atlantic Gateway venture.
Airlines around the world have been struggling to stay afloat after the Covid-19 pandemic ended a decades-long aviation boom. Germany offered Deutsche Lufthansa AG a 9 billion-euro package of loans and equity investment.
Lufthansa has won European Union backing for its aid package. The German airline’s bailout will set a precedent for airlines receiving direct state support to give up slots, European Union Competition Commissioner Margrethe Vestager said in an interview on June 1.
In 2015, Portugal agreed to sell 61% of TAP to Atlantic Gateway as part of a privatization program that aimed to reduce the country’s debt. A few months later, Prime Minister Antonio Costa’s newly elected Socialist government partly reversed the airline’s privatization, paying 1.9 million euros to increase its stake to 50% from 34%.
Costa considers TAP a strategic asset because its flights link the Portuguese diaspora around the world, and also connect the mainland to the Madeira and Azores archipelagos in the middle of the Atlantic. Before the coronavirus pandemic brought global travel to a halt, TAP had been modernizing its fleet and adding new destinations in the Americas.
TAP’s debt currently stands at about 800 million euros, according to Infrastructure Minister Pedro Nuno Santos.
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