“We are recovering faster than our peers in the sector” from what was one of the most important crises in the industry, defended the executive president of TAP. In the presentation of the results for the first half of the year, Christine Ourmières-Widener highlighted that the destinations of the Portuguese airline were less affected by the flight restrictions that affected the Asian markets to which TAP does not fly more. “We do not fly to Asia and we are benefiting from this different level of restrictions (mainly due to the pandemic).”

“We are better than plan,” the chief executive stressed, “but we are being cautious because the industry is being surprised by the strength of the recovery.” According to the executive president of TAP, the disturbances in the operation in several airports have not yet been overcome. In August, the company preemptively canceled more than 150 flights, having diverted most of the 14,000 passengers to its other flights.

Despite the fact that the company’s operating results, which were already positive in the second quarter, are on track to meet the objectives of the restructuring plan, the president of TAP admits that there are several challenges on the horizon for the second half of the year . The manager pointed to inflation and its impact on demand, the interruption of airport operations and the recession scenario, as the main risks. But for now he noted that bookings for the third quarter remain strong.

Given the possibility of a strike, given the growing tone of protest from various classes of workers, Christine Ourmières-Widener admits that “any manager is worried about a strike scenario, it is more of a disruption. But we trust that our unions will realize that the interruption of our operation would be very detrimental to the fulfillment of the plan. We spend a lot of time arguing with these partners.”

The company has hired more than 400 crew members this year to respond to the increase in demand and has already reduced part of the negotiated salary cut in 2021, however, several unions have demanded a faster replacement of the cuts given the level of recovery of the sector and of TAP itself. In addition to salary cuts, the carrier continues to renegotiate contracts with suppliers, having obtained savings of 137 million euros with the review of 800 procedures,

The manager also confronted the use of flights operated by other companies for TAP, a practice that she says has already been done in the past and is a classic throughout the industry. The use of flights operated, for example, by Air Bulgaria, is also justified by the delay in aircraft deliveries.

Dollar and expensive fuels are challenges

The increase in the price of fuel, a bill that is expected to reach one billion euros by the end of the year (409 million euros until June), is one of the main factors of pressure on the cost side that the company does not control. TAP has been protecting half of its consumption by contracting risk protection instruments. Without the fuel effect, costs would have been reduced by 9%.

We are meeting the planned objective, but it is not enough. Operating results are not earnings. And we have to pay financial costs that we still cannot fully cover”, said the financial manager, Gonçalo Pires.

The company recorded losses of €80 million in the second quarter and €202 million in the first half, but recurring operating results are positive —€48 million in the second quarter and €1 million at the end of the half— and are better than anticipated in the restructuring plan. “We are confident that we will present better operating results,” but there are factors that affect net results, such as the appreciation of the dollar, which increases financial costs, Gonçalo Pires stressed. Two thirds of the company’s debt is in this currency.

From an operational point of view, the revenue per seat offered is more positive than in 2019, as a result of a strong recovery in the number of passengers and associated revenues, combined with a reduction in the fleet. PRASK (passenger revenue per available seat kilometer) increased 8.5% in the second quarter compared to the same period in 2019.