TAP: a history of control, to be or not to be state owned

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Manuel Santos Vitor

Abreu Advogados



António Frusoni Gonçalves

Abreu Advogados



TAP was created in 1945, on the brink of the end of the Second World War. As the first public service of Portuguese aerial transportation, it was fully State owned

In 1953, TAP was converted into a limited liability private company of which the controlling shareholder was the State, holding approximately 65 per cent of the company’s share capital.[1]

In 1975, the company was nationalised by the Portuguese Government by means of Decree-Law number 205-E/75, of 16 April 1975, following the military revolution that had put an end to the Portuguese Salazar dictatorship on 25 April1974. As such, the company was legally converted into a fully state-owned enterprise, bearing the name ‘Transportes Aéreos Portugueses, EPE’.

First attempts at privatisation

During the 1980s the impetus that followed the revolution lessened and the intervention of the state in the economy was gradually reduced as a result of the privatisation of nationalised companies, the growth of the private economy and Portugal having become a Member State of the European Union (then the European Economic Community) in 1986.

It was therefore not a surprise that, by Decree-Law 312/91 of 17 August1991, TAP was converted from a state-owned enterprise into a limited liability company with the state as the sole shareholder. This was a necessary prior step to its privatisation. However, little occurred in the 1990s, even though the Portuguese Government’s ‘Privatisations Programme’ set out, as a political and economic goal, the reinforcement of TAP’s competitiveness through the opening of the company’s capital to strategic private partners. The Portuguese Government would still maintain a reference stake.

In 2000, the Portuguese Government negotiated and even approved the acquisition of 34 per cent of TAP by SAir Group, the holding company that controlled Swissair. However, the acquisition fell through and ended in controversy due to the financial difficulties of the Swiss company. [2]

Shortly thereafter, the holding company TAP SGPS, SA, was incorporated by means of Decree-Law number 87/2003, of 26 April 2003 and became the head of the group.

Little occurred over the following years. TAP proved to be a resilient company, surviving the turmoil after 9/11,during which we watched the consolidation of very large groups, such as KLM/Air France and BA/Iberia, and the disappearance of several European national carriers such as Swissair, Sabena and Olympic Airlines.

Even so, and throughout this period, the performance of TAP was far from good and it was unable to modernise itself and renew the fleet as it should, which was also due to EU rules limiting State investment.


In 2011 the Portuguese State undertook the privatisation of TAP pursuant, to the financial assistance programme then entered by Portugal with the IMF, the ECB and the European Commission.

In 2014, Decree-Law number 181-A/2014, of 24 December was approved, determining the indirect re-privatisation of the operational company TAP(Transportes Aéreos Portugueses, SA)by means of a direct sale of up to 61 per cent of the company’s shares, as well as, the public offering of five per cent of its shares to TAP employees.

 In May 2015, three groups of investors handed over final proposals of purchase of such stake to the Portuguese Government and, on 12 June2015, the final decision of the Portuguese Government to privatize TAP was publicly announced.

The procedure was effectively concluded on 12 November2015, by virtue of the sale of shares representing 61 per cent of TAP's share capital to the Atlantic Gateway consortium, then formed by the Portuguese company HPGS, SGPS, SA, controlled by the Portuguese businessman Humberto Pedrosa and DGN Corporation, North America Holding, controlled by David Gary Neeleman.[3]

Atlantic Gateway committed to capitalise the company and even paid approximately €154meuros in equity contributions, to balance the company’s financial situation, right after the re-privatisation.[4]


Despite those arrangements, less than one year later, in 2016, a new Portuguese Government[5] and Atlantic Gateway entered into a Memorandum of Understanding governing the reconfiguration of the participation held by the Portuguese Government in TAP.

The final transaction which came to re-define the shareholder structure of the Group as of 31 December2019, occurred on 30 June2017.

According to the company’s Consolidated Financial Accounts, in 2019 the shareholder structure was as follows:

  • Parpublica – Participações Públicas (SGPS), SA[6]held 750.000 category B shares, representing 50 per cent of the share capital and voting rights and 5 per cent of the economic rights of the company;
  • Atlantic Gateway (integrated by Global Azulair Projects, SGPS, SA and DGN Corporation, both of which were controlled by Neeleman and HPGB, SGPS, SA, controlled by Pedrosa)held 650.000 category A shares, representing 45 per cent of the share capital and voting rights and 90 per cent of the economic rights of the company; and
  • Various shareholders, including employees of the TAP Group, held 75.000 ordinary shares, representing five per cent of the share capital, voting rights and economic rights of the company.

Parpublica and Atlantic Gateway appointed all members of the management of TAP. However only directors appointed by Atlantic Gateway were executive directors.

As such, the balance reached was that, even though the State held 45 per cent, it had no executive directors and therefore only had a scarce presence in the management of the company and very limited economic rights as a shareholder. However, all investment was to be carried out by the new private shareholder.

 Indeed, in the following two years TAP grew significantly, with new aircrafts, additional crews and new routes.

Covid-19 and consolidation of the government position

According to TAP, the company transported a record number of passengers in 2019, reaching 17.1 million (an increase of 8.2 per cent on the previous year).

Additionally, according to the said financial statements, as of 2019the TAP Group was among the largest employers in the country and a significant contributor to Portuguese GDP.

Under the stewardship of the private shareholders and their funding, TAP was able to overhaul its strategy and its fleet, which had not happened for many years. TAP was aiming high and affirming itself as a hub carrier between Africa, Brazil the US and Europe. However, the Covid-19 pandemic then struck.

The recent worldwide public health crisis had a particularly hard overall impact on the airline sector due to travel restrictions and cancellations, drastically affecting the number of passengers transported during the current year. TAP was no exception and its activity nearly stopped altogether in March 2020, with very few limited exceptions. Its fleet was grounded and most of its staff were furloughed or dismissed.

The International Air Transport Association(IATA) estimated, on 24 March2020, that industry passenger revenue in the airline sector could plummet US$252bn, worldwide.[7]

This scenario, aggravated by the Group’s historic financial losses, put TAP in a very difficult situation, which led to the government seeking approval for a financial bail-out of the Group.

On 10 June2020, the European Commission, by means of Decision number 57369, approved state relief for TAP, up to the amount of €1.2bn, to deal with its immediate liquidity needs.

The Portuguese Government’s intervention in the group, by means of a massive bail-out, was not received peacefully by its private shareholders. In fact the government imposed as a condition on the bail-out that the same amount had to be reimbursed in a short period of time or, otherwise, it would be converted into equity. The private shareholders would be diluted and the State would – again – become a controlling shareholder.

In public statements made on 29 June2020, the Portuguese Minister of Infrastructure confirmed that the Board of Directors of the Group’s holding company gathered and that the government’s proposal for the restructuring of the Group was turned down after the representatives of the private shareholders abstained from voting.[8]

After a deadlock of a few weeks, during which the financial and economic situation of the company continued to deteriorate significantly (and its activity remained at a standstill), a consensus was finally reached in a dramatic week where the government warned that either an agreement would be reached or the company would be forcefully nationalised.

At the last moment, an informal agreement for the exit of the companies controlled by Neeleman was reached.

On 16 July the government announced its willingness (and that underlying agreements had been reached) to once again become a controlling shareholder, holding 72.5 per cent of the share capital. An initial agreement was entered into on 17 July.[9]

This agreement signified that the government’s bail-out of the group could move forward.

The initial agreement was immediately followed by the approval of Resolution No. 53-C/2020, adopted by the Portuguese Council of Ministers on 17 July which approved the granting of a Loan and Financing Agreement of TAP, up to the amount of €1.2bn.

In the recitals to the Resolution, the importance of TAP to the Portuguese economy is highlighted as follows: ‘The importance of tourism as an essential sector for economic activity is now widely accepted as being responsible for over 10% of the national GDP, with the TAP Group taking on a role central in respect to the growth of national tourism… The Government's mission is to ensure the preservation of the value of the national airline and safeguard its strategic position so as to avoid insolvency of a company crucial for the development of the country…’

As a result of the agreements reached between the state and the private shareholders of TAP, the company is now once again controlled by the state, with Parpublica holding 72.5 per cent, Pedrosa holding 22.5 per cent and the employees of the company continuing to hold five per cent.

Significant work still has to be done. However, it is clear that the company must submit a restructuring plan in the coming months, with a view to recover from its difficult financial and economic situation. It is worth mentioning that TAP has gradually recovered its activity, albeit to a limited degree.

Moreover, the government decided to look internationally for a new Chief Executive Officer (for many years the CEO of TAP ,as a fully state-owned company, was a former director of Varig).

Time will tell as to what happens next. In a couple of years, the State may seek to privatise its participation, even if only partially, so that the company will once again be controlled by private shareholders. Insofar as there is a spectrum of conditions that may be imposed on State aid, this example is an interesting illustration of the assertion of government interests. Oscillating between privatisation and state ownership would seem to be part of TAP’s DNA.


[1]Tânia Barros Ferreira Moreira, ‘Privatização da TAP: algumas reflexões’(Economic Faculty of the University of Coimbra).

[3]Thesis “Privatização da TAP: algumas reflexões” by Mrs. Tânia Barros Ferreira Moreira Santiago, from the Economic Faculty of the University of Coimbra.


[5]This new government came into office in late 2015, after general elections in October 2015. The privatisation of2015 was implemented by the former government.

[6]Parpublica is a state-owned holding company that holds the participations of the Portuguese State in private companies.

[7]‘Deeper revenue hit from Covid-19’ (IATA, 24 March 2020), see www.iata.org/en/pressroom/pr/2020-03-24-01/



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