Portugal’s €1.2bn airline bailout given EU blessing

Portugal's flag-carrier got a much-needed windfall. [Photo: joaosgodinho / Shutterstock]

The Portuguese government’s decision to grant national airline TAP a €1.2 billion rescue loan was approved by the European Commission’s competition authorities on Wednesday (10 June), which cited the carrier’s crucial role in the country’s tourism sector.

Portugal received a timely gift on its National Day, as the Commission concluded that the loan is in line with the bloc’s competition rules, despite TAP not qualifying for special treatment under the EU executive’s relaxed state aid rules.

According to the Commission’s State Aid Temporary Framework, only companies that were in sound financial health before the start of the coronavirus crisis are eligible for more lenient assessment.

TAP faced difficulties before the 31 December 2019 cut-off point and, according to Minister for Infrastructure Pedro Nuno Santos, the firm’s debt currently stands at around €800 million.

But the Portuguese government’s insistence that the airline will either reimburse the loan or submit a restructuring plan within six months – a crucial ask of the Commission, which will only approve time-limited bailouts – was ultimately convincing enough.

It adds to a growing list of airlines that will receive Brussels-approved aid, including Air France, Lufthansa and SAS. TAP’s bailout could also be a positive sign for embattled carrier Alitalia, which was also in financial difficulty before the crisis began.

Vestager defends EU approach to Lufthansa mega bailout, as carrier agrees terms

EU competition chief Margrethe Vestager said on Friday (29 May) that the European Commission was not creating unnecessary obstacles to Lufthansa’s €9 billion bailout, shortly before the carrier agreed to accept the Commission’s set of conditions.

The Commission said in a statement that the €1.2bn “aims at providing TAP with sufficient resources to address its immediate liquidity needs, with a view of preparing a plan for the long-term viability of the company.”

EU competition chief Margrethe Vestager said the loan will “indirectly benefit the Portuguese tourism sector and economy as a whole”, citing the reopening of borders and lifting of lockdown measures in some European countries.

TAP has a fleet of more than 100 planes and flies 17 million passengers from its hubs in Portugal to destinations around the world, making it an important cog in the tourism sector, which contributes more than 8% to national GDP.

However, the bailout’s terms make little mention of any green conditions, which have featured in the French government’s €7bn aid package and, most recently, Austria’s €600m bailout for their airlines. The requirements of those deals range from emission reductions to fleet renewal.

Portugal’s flag-carrier recently completed an ambitious revamp of its long-haul aircraft, which brought the average age of its fleet down from 15 years to just four. The firm hailed it as the “one of the fastest fleet transformations ever in the world”.

The green compromise in the Austrian Airlines bailout

After weeks of negotiations, it is now set: Austrian Airlines (AUA) is saved from insolvency by the Black-Green government. For the Greens, who are in a governing coalition in Austria for the first time, it was a difficult litmus test. EURACTIV Germany reports.

The government owns a 50% share of the airline, while its employees hold a 5% stake. Brazilian-American entrepreneur David Neeleman owns the rest of the shares. The final deal is yet to be finalised but it appears that the government will not seek to increase its holdings.

TAP will hope to make it two-in-a-row in receiving favourable EU decisions on Thursday (11 June), when the European Court of Justice is expected to rule on a passenger rights case involving the carrier.

A passenger is claiming compensation for a long delay to a flight they took with TAP, which the airline refuses to pay, citing “extraordinary circumstances”, after a passenger on the previous flight bit another traveller and forced the pilot to land at a different airport.

Lisbon’s court of justice wants to know whether this brand of disruptive behaviour qualifies as “extraordinary circumstances”, while passenger groups will hope the ECJ judges decide to give the EU’s rights codex more bite.

EU court gives passenger rights rules teeth in latest case

The European Court of Justice decided on Thursday (11 June) that the “unruly behaviour” of  an aircraft passenger may release airlines from their obligation to pay out compensation for flight delays, in a case involving a man who bit a fellow traveller.

[Edited by Benjamin Fox]

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