humble commitment to reality

For the author of the book TAP What future? How did we get here?, The European Commission’s decision “is the daughter of a state government, a minister with a far-left ideology and a commissioner and directorate general unable to impose themselves on political pressure”. It leaves many warnings and references to many dangers.

The commission finally published a December 21 decision on TAP, clearing classified information. How do you rate this decision?

I start with what is critical to the future of TAP, other than what the European Commission and the government can decide. Without central traffic, TAP is not viable and Humberto Delgado Airport caters to traffic associated with national tourism. The revision of the company agreement will only succeed if it is the result of a severe social conflict that has led to a historic agreement between the shareholder and the unions. Without adequate integration into an international group, TAP is not viable in the European single market. In Lisbon, TAP won’t have new competition until the opening of Montego Airport – possibly in 2028 – which is bad for the country. These will be the biggest challenges facing the shareholders, the state, management and workers in their relationship with customers (the market).

The subordination of the independence of the Directorate General, the Competition Commissioner and the Committee to politics is evident in the Alitalia case. Along those lines, the decision on TAP is a modest adherence to the reality I expected in a Nascer do SOL interview in September.

And what about the axis?

It is positive to note that TAP “intends to increasingly focus its operations at the Lisbon Airport Centre”. The decision puts pressure on “shortcuts that generate losses and those that have no value in feeding the axis. This means that there are no political routes and international flights of alleged “regional cohesion” departing from Porto, Faro and Funchal. It is positive that the Minister has already recognized this fact and that the Director The executive has gone to Porto to tell the truth and not in an imaginary second center. In the evaluation of the center, a tourist generates four passengers for TAP and ANA. But most of these tourists only pass through the airport and have little contribution to the economy of the city and the country. The problem is whether TAP Competitive on the roads of Brazil, USA and Canada or not.Without central transcontinental traffic, TAP is not viable, Lisbon airport loses its value and the country loses an opportunity.The competitiveness of the center and its value to the city and country is gained from attracting businesses and businesses on a transcontinental basis, Taking advantage of the hub roads and generating commercial traffic, this should become a priority for the government and city council.

What about the company agreement?

Cost reduction is the main productivity factor of an airline and the factor most relied upon by management. Staff costs are at the forefront of this reduction, with attention to liaison staff. In these months, TAP neglected the quality of contact with dissatisfied customers. These are moments of truth (Jan Carlzon, CEO of SAS), which, when handled properly, end up building customer loyalty. Disregard affects the reputation (brand image) of the company. The “emergency agreements” left what Vital Moreira called condominiums between state and unions in the management of TAP. Productivity depends more on existing company agreement costs and to a lesser extent on wages.

The increase in worker productivity at TAP requires a new company agreement, which enshrines the transformation of the nationalized company into a competitive European airline. Foreign counterparts underwent a process according to criteria laid out by Willie Walsh at AerLingus, British Airways and Iberia: an intense labor struggle culminating in an agreement between shareholders and unions, the path to success for those companies. The weakness of TAP and its threat to the future is the government’s state policy and minister’s ideology. The Minister has made progress in getting closer to reality, but I am afraid that he will not be able to withstand this inevitable strike to clean up the “apartment complex” of which Vital Moreira speaks.

What about the new investor?

In the 1994 state aid, the government recognizes that the TAP, even if restructured and funded, does not have a critical mass to survive in the European single market. It assumes a commitment to privatize the company since 1997, a commitment that PS Government respects. In the absence of a similar strategic vision, the stockholder country limps. In June 2019, I started the ‘Private’ feud, which ended with TAP being expelled, once again nationalized. In November 2020, I realized that “it is very difficult for an airline alone to survive in the world of global aviation.” And “we do not rule out that TAP in the future will seek alliances.” Paradoxically, politics continues to nationalize TAP and the “new investor” appears only in the restructuring plan as a tactic of the TAP’s own “contribution”. On December 23, 2021, Pedro Nono Santos stated that: “The debate over whether to sell or not should be assumed politically. We believe that TAP should become part of an aviation group, and this is something that, more than that, impairs future TAP negotiations.” In my opinion, the airline “does not have the critical mass to survive in the European single market” and the strong strategic option to privatize it to 80% is limited – or impossible – due to state government policy and the minister’s ideology.

Ryanair has been talking about limiting competition at Lisbon Airport…

The Commission stresses that severe capacity constraints at Lisbon Airport are an impediment to entry or expansion of TAP competitors during the period of the Plan, which will continue at least until 2028, if the Montego Airport project continues. Aperture allocation is negligible. The fact is that TAP is still protected from competition at Lisbon Airport. Ryanair’s claims, in the process or publicly, require investigation by the regulator, ANAC, but are futile. This issue and the European Commission’s disregard for the Euro-Atlantic common origin proposals. The origin is this and other governments that prioritize TAP when the priority for the country is access to competitive air that TAP contributes to, but mainly depends on foreign companies. Looking to the west, we don’t see the sunrise.

Why do you say that the European Commission decided to make a modest compromise with reality?

The European Commission excludes respect for the principle of a market economy operator, which consists in assessing whether a private investor operating under normal market conditions will make the same investment, making 3200 million and the bankruptcy of TAP illegal. It excludes, based on the general policy of the Portuguese government, on the one hand, ensuring connection with the airport in Portugal, and on the other hand, avoiding the repercussions of the bankruptcy of Portuguese TAP Airlines on the country’s economy. Once this decision is made, ideology and politics are imposed on the rationality of economic factors in the single market of 1992 and the liberalization of 1993. And we arrive at a modest and much worse political settlement.

like that?

The text of the decision on “connecting airports in Portugal” is confusing and only takes into account the Lisbon airport, not Portugal. Lisbon has low-cost, easily exchangeable, point-to-point flights and central airlines from Europe and the Middle East. There is a TAP transcontinental hub in addition to the point-to-point tracks that feed it. The hub is important to TAP and Lisbon Airport, and less important to the country, but Lisbon’s extrapolation to Portugal does not correspond to reality.

Hence this says a lot about the country’s economy…

This point requires a red ball on the screen. We know that the government justifies the importance of the TAP Economics program with the arguments affixed along with the spit that would fail a first-year economics student and not with an exempt study by a top economics school. Although there is an “in-depth investigation”, the commission accepts the government’s position and does not require study, which is simple for a first-class economics school. This is what I call a political service.

And what about tourism?

What matters to the country is the “receiving tourism” of non-residents of Portugal, which generates revenue from travel and tourism in the BOP. It is not “outbound tourism” for residents of Portugal who travel abroad, which generates expenditures in the above-mentioned balance. I quote from the resolution: «TAP decisively and significantly supports the growth of one of the most important economic activities of the country, tourism». This is an illusion. TAP was and will remain insignificant in Faro and has not contributed to the exceptional growth of Porto Airport. In Madeira it loses its importance and in the Azores it was Ryanair and EasyJet that brought tourism out of peace. In Lisbon, TAP airline will account for about 25% of incoming tourism at the airport. It is dangerous that the “in-depth investigation” of the Directorate General of Competition ignored this fact, which was clearly measured by the National Institute of Statistics and Eurostat. A “modest commitment to reality” is too lenient for this level of blindness. The decision came as a result of a state government, a minister with an extreme leftist ideology, a commissioner and a general directorate unable to impose themselves under political pressure. They do not respect the legacy of Carl van Mert, Vice-Chairman of the Committee (1993/99) and responsible for competition policy. According to the Guardian, “one of the most powerful men in Europe” is able to impose himself on the United States. The European Regulation on Air Transport (1992/93) is designed for light, agile and fast carriers to adapt to market demands, as is the case only for private companies. A nationalized company with policies (not strategic guidelines) incompatible with the European single market is weakened from the start. Whoever lives will see.