It sounds like a bad fairy tale from 1001 Nights, but it's a harsh reality in the middle of the EU. Little Portugal bailed out TAP with grants of 3,2 billion during the pandemic, more than any other country and with no obligation to pay back. This is just one of many points that cause massive misunderstanding and cast a dark shadow over Portugal. But what is going on unnoticed by the rest of Europe and who are the actors involved? We want to illuminate the dark corners in several parts.

It all sounded too good. David Neeleman, one of the most successful executives in the industry, joined TAP in 2015 with the Atlantic Gateway consortium, having already successfully founded JetBlue, Azul, Westjet and Breeze. The fleet was renewed as one of the first in Europe with A320neo and A330neo. A spirit of optimism in the poorest country in Western Europe with a minimum salary of around 700 euros per month.

A few years later, politicians and local actors managed to turn the picture completely, sink 3,2 billion and scare away the competent manager. No one in Europe subsidizes as much as Portugal and is still so unsuccessful. But what happened?

There are currently problems everywhere, one of the newest fleets in Europe is causing problems, the staff is on strike, the airline has been nationalized, the responsible minister is overwhelmed, holiday flights are being sold at bargain prices throughout Europe, penalties and lost court cases are hailing, while the management is completely aloof appears, but let's look at that in detail:

fleet renewal

Tap was the first airline in Europe to put the A2017neo into operation at the end of 330, and A321LRs were also added. But early adopters have to reckon with the fact that not everything runs smoothly and the fleet starts to cause problems. An old A330-200 (CS-TOO) had to be kept in the fleet to offer a backup for stubborn Rolls-Royce engines, two more A330-200s were converted into freighters (preighters) in 2020 and even as TAP “AIR CARGO” painted. The CS-TON only had its first cargo flight at the end of October 2022 and the CS-TOP is already being converted back to passenger use.

Coupled with the low annual flight hours of the staff and the extremely ambitious holiday flight schedule for vacationers from all over Europe, the capacity is no longer sufficient and ACMI is busy chartering in: Loganair, Bulgaria Air deliver several Embraers, Hifly regularly helps with A340 and A330 to the Caribbean as well as in the summer time to Warsaw and Vienna, costs one million euros per month for Hifly alone.

Most recently, White was thrown out with eight ATR 72-600s and Xfly was procured as a replacement, Nordica is now also flying for Tap. It is more colorful than the most colorful Austrian Lauda time.

The intermediate class EconomyXtra, which was only introduced in 2019, was also secretly and quietly abolished: First the included food and finally the name. There remain reservable seats called ComfortSeat and many sunk costs related to the recent product launch. EconomyXtra and the Comfort Seats can still be reserved free of charge with a bug.

The Board

In 2015, when Neeleman joined Tap, Christine Ourmières-Widener, then Managing Director of CityJet in London, abruptly left the airline with immediate effect. A year earlier, Hans Rudolf Wöhrl joined CityJet with his Intro Aviation, as did Intersky. Today CityJet is under creditor protection and only flies ACMI instead of regular routes.

In 2017 Christine Ourmières-Widener became Managing Director of FlyBe, in February 2019 FlyBe was sold to the Connect Airways consortium and at the end of May the airline announced that the Managing Director would leave FlyBe within just six weeks.

Two years later in June 2021 she was appointed CEO of TAP. Was it a brilliant move? Did the owner, the state, now want to pull the ripcord and call the expert to process it? Because all the billions didn't do much, apart from keeping the sick patients alive artificially. The wage costs per employee are only slightly below those of the Lufthansa Group (including Swiss!) and are even higher than the kerosene expenditure, unthinkable in the industry, unthinkable also in the private sector, especially when comparing Portugal and the DACH region.

But here, too, things are different. The newcomer travels cheerfully to a new destination in the route network every week and implements massive expansion plans: 9 new destinations, all holiday destinations such as Cancun and Punta Cana are launched, transfer tickets via Lisbon are really cheap, 100 euros transatlantic one-way in economy and 900 euros return in business on long-haul routes for all four flights from half of Europe. In Portugal it is already being joked that Portugal subsidizes intercontinental holiday flights for the rest of Europe.

It's not just the route network that's showing off, there's also a search for 79 brand new BMWs for the executives, the wife of the CEO's fitness trainer, who is completely unfamiliar with the industry, gets a management position with a monthly salary of €15.000 and the previous, less representative head office directly at the airport in Lisbon is no longer there either good enough, which is why a new one is being purchased directly at the world exhibition site for an annual rent of 4 million euros. Shortly after the privatization including the search for a buyer is aimed at, lease term unknown.

The staff

While management is having a good time in the crisis, the staff is beginning to worry about their own livelihoods. A strike against the privatization and loss of rights acquired over the years was announced on December 8th and 9th, management has already canceled over 360 flights. Current average costs per employee 56.000 euros per year with a minimum salary of 770 euros, 600 flight hours maximum per year compared to 900 at Austrian. It is certainly annoying that the 5% employee participation in the airline was completely diluted in the course of the recapitalization, whereby 5% at a probably symbolic one euro is not worth much.

Also as a precaution, 15 additional flights were canceled from November 400 to the end of the year due to staff shortages. Passengers on affected flights are simply rebooked days later without being asked, rebookings on Allianz airlines are refused despite a legal obligation.

Customer service

Flight cancellations and delays are currently the order of the day. Just on November 14, Tap received a $550.000 fine from the US Department of Transportation, which of course ultimately ends up being paid by the taxpayer. Refunds during the pandemic were, if at all, only available as vouchers valid for one year.

It gets even stranger: Tap has been officially warning since October 31.10st. on Twitter before a phishing attempt. Scammers pose as a tap and demand personal information as part of a flight delay compensation payment. Shortly before that, Tap was hacked and 1,5 million customer details were published on the Internet, which is still causing phishing and spam emails to this day.

That's not all, recently a check-in employee at Lisbon Airport was caught having pocketed more than 2000 euros in fees for additional baggage in cash and simply charged other passengers with it again by credit card.

The taxpayer as the owner

It seems that even the taxpayers' representatives do not know what they are doing. A second airline group also belongs to the Portuguese public sector: Sata and Azores Airlines of the autonomous region of the Azores. The sister Tap flies against them in competition, before the pandemic even transatlantic from Ponta Delgada to North America, currently between Lisbon and Porto and the Azores. The taxpayer, who subsidized Tap with more than 300 euros per capita, gets very cheap flight tickets and doubles management positions. However, Ryanair and EasyJet also fly these routes without subsidy, even cheaper and with fewer delays.

Another company owned by the owner has been responsible for mass flight cancellations and delays in recent weeks: NAV Portugal, the air traffic control and counterpart to Austro Control, has introduced new software that got completely out of control. Lisbon was one of the airports with the most delays in October.

Responsible for all this is a super minister: Pedro Nuno Santos, infrastructure and housing minister, who regularly exchanges blows with Prime Minister Costa, who is also part of the party, and was almost forced to resign. Unlike Germany or Austria, he negotiated the tap grants so badly that not a cent of it is returned. Other countries have even made a profit with loan repayments including interest.

In any case, from the outside, the ministry appears to be unprofessional, overwhelmed and incompetent, more on that in another episode about Lisbon Airport.

The privatization

But now from the small parts back to the big picture. The questionable superminister now sees privatization as the only way out, after he too has noticed that over three billion sunk are enough. But who buys such an airline? Doesn't a buyer have to be given several hundred million euros for a ridiculous purchase price, as was the case with Austrian at the time?

An ingenious move could lie hidden here. The current CEO has very good connections to France, comes from there and worked for Air France for two decades. If she manages to get a potential buyer to see a swan in the ugly duckling, she could still really pay for itself. Carsten Spohr, who is not a friend of Mayrhuber's takeover of Austrian, could also be under pressure after Air France snapped up ITA and IAG Iberia and Air Europa. This is not rational, Lufthansa has never been able to assert itself in markets with low purchasing power and there are many skeletons in the basement (Lufthansa Italia, Lufthansa Berlin, Lufthansa Düsseldorf, Jump, Germanwings, Eurowings, ...). Only recently, in conversation with the Norwegian sovereign wealth manager, Michael O'Leary said he sees IAG as a buyer of TAP.

And finally ... The management always lands softly, the former CEO and also the network boss have meanwhile been hired by Etihad, the previous network boss was up to mischief at Austrian and then at Netjets. In a while we will know how the story ends: will Tap become a new Malev or will someone buy the golf airline from the Atlantic, which will soon no longer have access to the state coffers.

This guest comment was written by: Carlos Mueller