TAP is restructuring the size of its aircraft fleet and already has “the possible sale of six to eight aircraft (six A319 and two A320) already underway. In addition, it is also studying “the early return of aircraft under an operating lease and the potential sale of aircraft under a finance lease”.
“The future evolution of the fleet will naturally be one of the structuring themes of the restructuring plan that is being drawn up” and that has to be delivered in Brussels by 10 December, says the group in the report related to the accounts of the first half this Monday night at the CMVM.
In view of the need to reduce the structure of the air carrier due to the effects that the covid-19 pandemic is having on travel, and to present a restructuring plan in Brussels because of state aid that could reach EUR 1200 million, the group says it has already negotiated with Airbus and other entities to delay delivery of new aircraft.
This agreement, says the report, was concluded and involves the “renegotiation of expected delivery dates for the period between 2020 and 2022”, with “an impact on the level of deferral of commitments for payment of pre-delivery payments to Airbus, as well as obtaining other commercial advantages in terms of the protection of aircraft prices ”.
According to TAP, it was agreed to postpone delivery dates for 13 A320neo aircraft from 2012-2022 to 2025-2027, as well as two A330neo aircraft from 2022 to 2024, which can be exchanged “for other models, to be evaluated based on market recovery and TAP’s needs at the time ”. These changes in delivery times allow the group to postpone a financial effort by reducing the investment planned for 2020-22 by approximately one billion dollars (854 million euros, at the current exchange rate).
As described in the half-yearly report now released, TAP contracted with Airbus the acquisition of 53 aircraft (of which 39 A320neo and 14 A330neo) “to be received between 2018 and 2025”. In June, TAP’s fleet, which is still in the process of renewal, consisted of 108 planes, of which 102 were operational (at the end of last year, the fleet consisted of 105 planes, against the 75 that existed in the year of privatization in 2015).
Looking at the second half, TAP states that four new aircraft will start operating (two A321neo LR, one A320neo and one A321neo).
124 million in “unpaid arrears”
Still with regard to the fleet, the accounts for the first half were closed with 124 million euros in “unpaid arrears” to aircraft suppliers under leasing. According to the report, TAP “negotiated payment plans with some of its current service providers until December 2020 and the extension of the payment term, which led to an increase in accounts payable compared to December 2019”.
No specific case two contracts leasing of aircraft, the group says that it has “been developing negotiations with lessors in order to reduce the monthly value of equipment rents “and to” obtain consent for the non-payment of rents and the extension of contractual terms “,” keeping present in these negotiations “, he explains,” the possible future need for fleet reduction arising from the restructuring plan ”.
Negotiations with these suppliers, says TAP, “are advancing at a good pace, and by the end of August, about 60% of the fleet under an operating lease regime had already completed the renegotiation or with the discussion concluded and in phase formalization of the respective documentation, and no impact has yet been recognized in the balance sheet of 30 June 2020 ”.
606 million losses and turbulent future
In terms of financial results, the TAP group recorded a loss of 606 million euros. The overwhelming majority of negative results came from TAP SA, with the air carrier suffering a loss of 582 million euros, about five times above the value recorded in the same period of 2019 (and which was already a negative result).
The group’s other 24 million euros in losses came from other activities, such as the catering, baggage handling (handling) or maintenance. These figures are the result of the partial stop in March and almost total in the following three months, with demand dropping due to the covid-19 outbreak.
The effects of the pandemic, says TAP, “are expected to continue to be significant in the coming quarters”, which can be exacerbated in the event of significant new outbreaks of the virus and the imposition of new restrictions on mobility (until a vaccine or an effective treatment) available) or simply because of the inability of economies to recover significantly and quickly from the adverse economic conditions caused by the pandemic so far, namely in terms of employment, disposable income and levels of consumer confidence ”.
The strengthening of the State in the group’s capital is still in progress, going from 50% to 72.5%, through the purchase of David Neeleman’s position, with the “green light” of the Competition Authority still missing.