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Commission approves €1.2bn rescue loan, opens investigation into €3.2 billion Portuguese TAP aid

Christian Fernsby |
By two separate decisions, the European Commission has re-approved €1.2 billion rescue aid to Transportes Aéreos Portugueses SGPS S.A. (“TAP Air Portugal”), and opened an investigation to assess whether the restructuring aid Portugal plans to grant to TAP is in line with EU rules on State aid granted to companies in difficulty.

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The opening of an investigation gives Portugal and interested third parties the opportunity to submit comments. It does not prejudge the outcome of the investigation.

At the time of the rescue aid TAP SGPS was a holding and a parent company of TAP Air Portugal, a major network airline operating in Portugal. In 2019, with a fleet of 108 planes, TAP Air Portugal served 95 destinations in 38 countries, carrying over 17 million passengers from its main hub, Lisbon, and other Portuguese airports to various international destinations.

On 10 June 2020, the Commission adopted a decision approving a €1.2 billion rescue loan to TAP SGPS, finding that the aid was in line with the requirements of the Commission's Guidelines on rescue and restructuring aid (“R&R Guidelines”).

By a judgment of 19 May 2021 (case T-465/20, Ryanair/Commission), the General Court of the European Union annulled the initial rescue aid decision.

In particular, the General Court found that the Commission had failed to indicate in its decision whether TAP SGPS belonged to a larger business group and resulting possible implications for its financial difficulties.

The General Court gave the Commission a possibility to adopt a new decision within two months, addressing these shortcomings.

The decision adopted today re- approves the rescue aid and further specifies the reasons for approving the aid, in connection with the situation of the TAP group and its shareholders in June 2020.

On 10 June 2021, Portugal formally notified to the Commission €3.2 billion restructuring aid, with the aim of financing a restructuring plan of TAP Group through TAP Air Portugal.

The restructuring plan sets out a package of measures for streamlining TAP Air Portugal operations and reducing costs. In particular, the restructuring plan provides for a split of TAP SGPS businesses into (i) a perimeter of non-core assets to divest in the course of the restructuring, and (ii) the airlines TAP Air Portugal and Portugalia, that will both be restructured.

TAP Air Portugal will reduce its fleet, streamline its network and adjust to reduced demand before 2023. In parallel, TAP is renegotiating terms with suppliers and lessors, and is reducing staff costs.

Portugal plans to finance the restructuring with €3.2 billion aid. This support would take the form of approximately €2.73 billion of equity and quasi equity measures, which include the €1.2 billion rescue loan to be converted into equity.

Additional support of approximately €512 million, in the form of a State guarantee to market loans, may be granted by Portugal as of 2022, in case TAP Air Portugal cannot access the financial markets in 2023-2025 as currently expected (thanks to an expected ratio of net financial debt to equity allowing it to access market finance without any State guarantee).


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