Atlantic Gateway, the company set up to bid for TAP, has made a few changes to its constitution and now is a limited company with nine directors, including Fernando Pinto, the current president of TAP.
The amendments to Atlantic Gateway’s legal set up and operating structure have been made in order to comply with conditions insisted on by Portugal’s civil aviation regulator but are being called 'cosmetic' by sources close to the sale.
The chief executive of TAP, Fernando Pinto, is the most controversial choice for the new board as his failure at the controls of TAP has been widely reported.
Brought in ten years ago with a brief to prepare the ailing state airline for privatisation, Pinto's extended reign at TAP has been marked by union unrest, a strike record that has hit the bottom line time and time again, a business over a billion euros in debt, and an proven inability to re-organise the airline’s structure and finances to make it attractive to buyers.
At the end of June 2015, Fernando Pinto said that he might "continue a little longer" at the helm of TAP after the completion of the privatisation if the new shareholders felt they needed him. It seems they do, as a position on the board of Gateway enables Pinto to be well paid for little effort if his appointment is in fact a ‘thank you.’
The Gateway offer, accepted by a government desperate to offload the TAP liability, will yield just €10 million for the taxpayer.
The original plan that the new buyer would relieve the state accounts of a billion plus euros in borrowings also has gone by the board as, after a government concession last week, the taxpayer now is guaranteeing TAP loans should the airline fail, even under private management.
Atlantic Gateway was set up by Humberto Pedrosa and David Neeleman (pictured) who on June 24th, 2015 signed an agreement with the state to purchase 61% of TAP’s shares.
Changes to the articles of association of Gateway were registered on November 5th, 2015 and were published quietly on the e-Justice Portal.
The original five person board of directors was made up by Humberto Pedrosa, his son David Pedrosa, Abilio Martins, a former director of Portugal Telecom under the disastrous tenure of Zeinal Bava, David Neeleman and Maximilian Urbahn.
Atlantic Gateway now has the legal status of private limited company with the object of "the management of shareholdings in other companies as an indirect form of economic activity," and "the company may, under the terms and within the limits of the applicable law, provide financing to investee companies."
This second alteration seems destined for use if and when TAP makes a profit and funds need to be withdrawn above and beyond the normal payment of dividends.
The 'loans to investee companies’ clause normally would ring alarm bells, but TAP now is owned by a private limited company and with the government’s remaining ‘golden share’ being an inconvenience rather than a threat, Neeleman and Pedroso can do pretty much what they want, within the law.
The capital of Atlantic Gateway is shown as €1 million with the Portuguese businessman Humberto Pedrosa down for €510,000 and David Neeleman a minority €490,000.
The company has not distinguished between Humberto Pedrosa’s ordinary shares and Neeleman’s Class A shares which, should this distinction remain, means Neeleman controls the company despite having a minority shareholding.
This twin share class structure was picked up by the National Civil Aviation Authority when reviewing the deal and should have been changed. If it has not, then Neeleman, a non-EC citizen, technically is control of a European airline, which he shouldn't be.
The original agreement was that Gateway injected fresh capital into the business but Atlantic Gateway has not shown it has the capital needed and the investment fund Cerberus Capital Management, based in New York, is on stand-by to inject €300 million in the company.
Such a capital injection would enable Cerberus to become the future real owner of TAP. Again, this is not what was meant to happen.
The new nine person board, appointed for three year terms, include Philippe Delmas a former vice president of Airbus, Sydney John Isaacs the head of ACE Aviation Holdings, Robert Milton the Chairman and CEO of ACE Aviation, and Henri Courpron the chairman of Plane View Partners and advisor to Bombardier.
The establishment of this seemingly strong board, with Pinto a notable exception, aims to demonstrate to the National Civil Aviation Authority that its requirement that TAP is controlled by Europeans is being met.
The question over Class A shares remains and it also is not clear how many board places can be appointed by Neeleman and how many by Pedroso.
The original articles of association gave Neeleman the majority of board appointees despite his lower shareholding, a point picked up by German Efromovich whose bid for TAP was rejected by the government in 2012, and again this year.
If Neeleman is proved to wield control over TAP, and if Efromovich can prove it, EC court beckons.
This all may be unravelled soon anyway as the Socialist Party manifesto pledged that TAP shares will be majority owned by the state.
The Socialist Party, if in government, will ensure that "The government will not allow the state to lose the ownership of the majority of the share capital of TAP and will find ways, including through effective action to the European institutions and the capital market - to capitalise, modernise and ensure the company's development in the service of the Portuguese and Lusophone countries."
With the socialists joining the Left Bloc and Communists in a well planned coup scheduled for next week, the future for TAP looks as confusing as ever, certainly the changes at Gateway and the lack of clarity over its pledge to take on the €1 billion plus debt, all smell rather fishy.
