Portugal's outgoing coalition government just couldn’t resist one last snub to the incoming Socialist Party leader as on Thursday it saw through the final approvals for the sale of ailing state airline TAP.
The Minister of the Presidency, Luis Marques Guedes, claimed that "The situation at TAP is of imminent financial collapse. There is the real risk of aircraft staying on the ground," although few will consider his reasoning as the real reason for pushing the deal through just days before António Costa is expected to be appointed Prime Minister.
The real reason for this urgency was that the caretaker government is terrified the Socialist Party regime will carry out its threat and cancel the privatisation, or reverse the deal if it already has been signed off.
TAP boss Fernando Pinto’s legacy of mismanagement, plus €1 billion of debt, has meant TAP is being sold into private hands as a bombed out shell without sufficient resources to pay this month’s salary bill or to pay for fuel, an essential ingredient when running an airline.
"On 11 November TAP enters a financial collapse and no longer has money to continue fully to honour its commitments."
This statement was in a letter written by Fernando Pinto to the president of state holding company Parpública and clearly was enough to panic the holding company’s management into transferring TAP to Gateway in return for €150 million payable within the next few days.
Whether Pinto was acting at the behest of his coalition government friends, or whether he truly had led TAP to the brink of a massive collapse, we may never know. Either way, if Neeleman and Pedroso insist on keeping Pinto on in the management of TAP, this mistake will be theirs alone.
One result of Thursday's decision to rush the deal through will be that the Socialist Party and left wing partners will be even more determined to overturn the deal should they form a government.
Gateway now has a "period of five days to inject €150 million," said Luís Marques Guedes, Minister of the Presidency.
Treasury Secretary Isabel Castelo Branco said the final agreement for the sale of 61% of TAP to Gateway will enable recapitalisation of TAP ahead of schedule.
"The agreement for the conclusion of the sale allows the capitalisation to be hurried up, with €150 million injected immediately, with another €120 million to be paid by June 2016," she said.
Under the June agreement, the Gateway consortium had one year to inject €270 million into the TAP which has out-of-control borrowings of well over €1 billion.
Having voted out the Passos Coelho coalition on Tuesday, the Socialist Party and left wing alliance on Wednesday demanded the state holding company Parpública stopped the sale of TAP as they want to keep in under state control. This demand was ignored and those running this state company can expect short shrift 'come the revolution.'
The left wing are calling the TAP sale ‘unlawful’ considering the coalition government's status of mere caretaker until a new prime minister is appointed.
If not actually unlawful, the move was deliberate and ensures Gateway is in a more powerful position where higher levels of compensation will be due if and when the Socialist Party leader reverses the deal.
The signing ceremony was held in private at Parpública's offices without the press in attendance. The current TAP boss Fernando Pinto claimed that if the deal did not go through, TAP would collapse. This is no credit to his management of the company that by any metrics can be considered as poor or below standard.
There remains one problem; the regulator has not determined the truth behind Gateway's ownership and who actually wields the power, so has not yet given its final approval.
Bus company boss Humberto Pedrosa owns the majority of shares in Gateway but non-Portuguese David Neeleman seems to control the board and only brought Pedrosa in at the last minute to show there was a Portuguese element in the ownership.
On 13 October, the Civil Aviation Authority gave a positive opinion on the TAP sale to Gateway, but insisted on clarification of the shareholder structure of Gateway, to see if it really was controlled by Humberto Pedrosa.
This question has yet to be answered satisfactorily even though more directors have been appointed to balance the former board configuration which favoured Neeleman.
The Left Bloc argued on Thursday evening that the caretaker government cannot legally act to sell TAP, and launched a challenge to President Cavaco Silva to block the process. Right wing Cavaco Silva of course did no such thing but the deal also may be referred to our old friends at the Constitutional Court to see if anyone has acted outside their terms of reference.
The parliamentary leader of the Left Bloc argued that we must "tell this government that it has no power to privatise anything" and that the President should halt the process.
One thing is certain, any other businessmen pondering whether to do business with the Portuguese state should look at the problems, barriers and approvals needed by Neeleman and Pedrosa, and walk away - maintaining a brisk pace until the urge has faded.
Had TAP gone bust this week, the taxpayer would have had to pick up the bill. Now that Gateway owns 61% of TAP, should the airline go bust many think Gateway will pay its share of the loss.
Not at all - a recent amendment to the agreement means the taxpayer picks up the bill in the event of a TAP collapse.
Hopefully, TAP will now become a huge success despite Fernando Pinto's involvement, as the taxpayer remains liable should the business fold. Gateway have plans for the development of the business but the threat remains that the Socialist Party and left wing alliance will re-nationalise the airline as stated in its agreed manifesto.
António Costa already has started to modify his renationalisation plans, saying now that it all depends on costs. Buying back Gateway's 61% share may prove harder than expected now that the deal has gone through, but this was Passos Coelho's plan, to make things as awkward as possible for the new regime.
Trumping anything the Socialist Party may come up with to reverse the sale, the Communist Party already has submitted a motion to parliament to do just that; the farce goes on.
But the future of the company remains in the hands of the National Civil Aviation Authority as it is the aviation regulator that it will be issuing (or not issuing) the Air Operator Certificate for TAP, which has to be reviewed and revalidated whenever there is a change of control of a company, as now.
The Authority is responsible for evaluating the "control checks" in accordance with EC rules to ensure that TAP remains in European hands, a debatable issue in this case as Gateway's construction and operation is unclear.
