Portugal and Italy are both flirting with bringing their flag-carrying airlines under state-ownership to combat the economic hardships caused or exacerbated by the global pandemic.
On Tuesday (30 June), the Portuguese government confirmed that it was unable to strike a deal with shareholders over a €1.2 billion bailout for TAP that had already secured the blessing of the EU’s competition regulator.
The state owns 50% of the carrier and has threatened to nationalise it completely if 45% stakeholder David Neeleman, a US businessman, does not agree to the terms of the deal, which would involve significant restructuring of the firm.
Expresso reported that Neeleman was unwilling to accept greater operational control on the part of the government but could yet agree to divest under the right conditions.
A renationalisation decree will be sent to Portuguese President Marcelo Rebelo de Sousa if no compromise can be found.
Infrastructure Minister Pedro Nuno Santos told a parliamentary committee that the state “is ready to intervene and save the company […] the private shareholder continues to refuse the state’s conditions.”
The minister later acknowledged that taking TAP out of partial private ownership is “not the ideal model, it is the possible model”.
Portugal’s bailout received the all-clear from the European Commission on 10 June but was assessed under the bloc’s regular state aid codex rather than the relaxed framework it has put in place for companies laid low purely by the virus outbreak.
TAP was in financial difficulty before the 31 December 2019 cut-off point established by the EU executive – its debt has since risen to around €800 million according to the government – so it had to agree to submit a restructuring plan within six months if the loan is not repaid.
The Alitalia Job
Embattled airline Alitalia is also on the cusp of coming back under state control after the Italian government pressed ahead with its plan to bail out the flag-carrier with €3 billion. A final deal could be brokered later this week.
New management heads were appointed on Monday and the plan is to fund a new company that will absorb Alitalia’s existing assets, leaving its debts to a bankruptcy administrator.
Industry Minister Stefano Patuanelli recently told Italian lawmakers that the new Alitalia would focus more on long-haul flights, while Transport Minister Paola De Micheli said it would have a fleet of around 100 planes, possibly using Air Italy assets as well.
The Italian government’s involvement in the airline will create more work for the EU’s competition services, as state ownership is a red-flag for single market distortion and Brussels might set conditions in return for its approval.
Earlier this month, the Commission said that Lufthansa would have to yield airport takeoff and landing slots at its Frankfurt and Munich hubs to ensure fair competition, after the German government agreed to take a 20% stake for a €9 billion bailout.
“Just the fact that you have the state on board as a shareholder may also trigger more trust in your viability,” EU competition chief Margrethe Vestager said in late May, warning that “the economy will pick up again” and that “competitors need to be given a level playing field”.
Alitalia’s pending rescue is unlikely to qualify for the EU’s relaxed state aid procedure, as the airline has been in very public financial difficulty for a number of years. Rome has administered the firm since 2017 and has injected money in an attempt to attract prospective buyers.
An inquest into a €400 million loan was launched in February and is running in parallel to a separate probe into a €900 million bridge loan granted by the government in 2017.
Europe’s airlines have received or been promised more than €30 billion in aid prompted by the coronavirus outbreak, which totally curbed air travel demand in the months of March and April.
[Edited by Zoran Radosavljevic]