The government has decided that, if and when TAP eventually is part-privatised, an auditor should be appointed to monitor the company's financial situation and that monthly consolidated accounts will be produced.
The decision was announced by Transport Minister Sergio Monteiro as the Council of Ministers today approved the 'strengthening of control mechanisms' at TAP after it is sold off int he hope that this will put at ease TAP's bankers.
TAP has an increasingly poor financial position with bank borrowing running at €647 million, most of it in the form of short-term debt that has to be repaid within one year.
The contract to sell TAP to Gateway signed last June was on the provision that the state restructured this debt but is has not done so and the whole deal is at risk.
The banks do not want to give Gateway the same credit terms as it gives the government, why would they, so it is difficult to just hand over the debts to Gateway without renegotiating the terms of the agreement. The new monthly accounts regime will help the banks decide whether to take on Gatweway as a customer. In theory they could call in their loans and break up the company.
Minister for the Presidency, Marques Guedes, said that these new audit and reporting measures attempt precisely to overcome problems such as those now faced in renegotiating TAP’s debt.
Guedes did not ponder why only now the state is interested in receiving monthly accounts from the airline and why ti is necessary to have a new accountant appointed to the task.
The privatisation of TAP was approved by the National Civil Aviation Authority on October 13th but the authority required a revision of the statutes of the Atlantic Gateway company to show that it is Humberto Pedrosa who controls the consortium, not David Neeleman.
This will need an amendment to the neat deal that gives Neeleman more seats on the Gateway board than Pedroso, despite Pedroso nominally owning more shares than Neeleman.
Gateway also is fully aware that should the Socialist Party and its left wing allies get into power, the TAP deal is likely to be cancelled. This is the final and most likely threat as the Socialist Party leader Antonio Costa considers the 61% of TAP being sold to Gateway as being wrong.
Costa said today that a future Socialist government will do everything in its power to ensure that TAP does not have the majority of its shares sold into private ownership.
TAP’s losses worsened in the first half of this year by €109.6 million.
As if the financial situation was not enough for ministerial despair, TAP announced today that the there may be significant delays in and out of Portugal in the next two weeks due to the current NATO military exercises in Portugal, Spain and Italy.
Comments
With major EU countries like Germany and France struggling with their own low cost airlines or being threatened by other peoples. And Portugal may be taking the TAP turkey back? When so many of its regulars have already discovered the joys of cheap flights during the recent labour troubles.
The value of TAP is to the moneyed elite. Only they, and the small middle class segment, can afford to fly. Most Portuguese peasants holiday in the Algarve - which does not need a TAP flight. By taking the back roads to avoid a toll you can be there from anywhere in Portugal in a day. Unheard of just a generation ago.
But the money markets are watching eagerly for anything suspicious that risks their payback on Portugal's monstrous debt overhang - so will price the doubt into Portugal's borrowings.