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Portugal's hidden billions Part 6 - TAP

Portugal's hidden billions Part 6 - Air PortugalPortugal was a poor country with a hardworking people, who carefully took care of their resources. Families grew vegetables, harvested fruits & nuts. They were happy, had plenty of gold, no debts, but there was no freedom of speech.

Since the ECC became UE and Portugal, against warnings and the choice of the best EU-economies today (UK, Sweden, Poland) accepted the Euro, huge private and public debts became and still are a burden. Also public corporations, earlier running with a profit, with almost no debts, entered a spiral of debts and losses, mainly because politicians, not managers, got onto the board.

Air Portugal started a good flight under Fernando Pinto, back to professional management. But in order to occupy the vacuum of VARIG and other bankrupt airlines and the growth of tourism mainly from So.America to Europe, it borrowed too much for new airplanes. And, according to some politicians, the EU allows no more state capital on state-owned airlines.
The key problem of Air Portugal is that it has to choose between plenty more capital to lower it debts OR get rid of many airplanes and downsize. But politicians, against the advice of mature trade-experts, always wish to expand.

With its excellent shops and rebuilding capacity in Brazil, TAP is unique for major upgrades. It could optimize installed capacity with a long-due program to upgrade its medium distance fleet.

The sudden and huge growth of tourists from Brazil is already squeezing, as its economy is quickly entering a long and deep recession. The same with Venezuela and So. Africa, other far-way sources of travel, by the same reason. Many of the long-distance aircrafts will no longer run at break-even, but bring a great loss.

One of the poor destinations of Air Portugal Euros was the maintenance shops in Rio and Porto-Alegre. Many millions were there invested and it is only now, finally, well organized. TAP could easily cut the leased aircrafts for long-distance and upgrade, not only update, its older fleet.

Each family of equipments in an aircraft has a different life-time. The cabin lasts 40 years, engines 20, avionics 6. Most is overhauled after some 6 years. A major overhaul, after some 8-12 years, take plenty of time and many airlines upgrade engines, in order to save fuel and lower noise on take-off.

With its excellent shops and rebuilding capacity in Brazil, TAP is unique for major upgrades. It could optimize installed capacity with a long-due program to upgrade its medium distance fleet, cut some of the new destinations which no longer bring profit and, above all, focus on a niche which is very profitable: a hub for aircargo to&from Europe to So. America, Mexico and No.West Africa. Only some cabin-crew would be unemployed, while captains would be kept.

© Jack Soifer

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