LISBON, Feb 14 (Reuters) – Portugal may have to provide more than the 500 million euros ($606 million) it budgeted for ailing airline TAP this year due to the worsening COVID-19 pandemic, its finance minister said.
Asked how much more the Portuguese government expects to spend on TAP this year, Joao Leao told Sunday’s Jornal de Negocios: “That is still being analysed”.
“The situation of TAP is very demanding … that amount may have to be reconsidered because at the moment the pandemic is having a much stronger impact than expected,” Leao said.
In December, a government plan to rescue TAP proposed 2,000 job cuts by 2022 and pay cuts of up to 25%, while the airline would need around 2 billion euros in extra funds with state guarantees to cover its financing needs until 2024.
The redundancies may be lower if the European Union accepts an agreement in principle last week between the leaders of 15 unions and TAP’s board.
However, if the EU executive rejects Lisbon’s proposal, TAP would have to immediately repay a 1.2 billion euro rescue loan agreed in June, which could lead to its insolvency.
Leao said the plan “will imply a very significant structural change in the company to ensure that TAP becomes a profitable company and manages to survive this crisis”, adding that talks with Brussels needed to be completed “as quickly as possible”.
TAP asked for state aid in April after suspending almost all of its 2,500 weekly flights at the height of the coronavirus crisis, and reported losses of more than 700 million euros for the first nine months of 2020.
Leao also said the government will maintain support measures to companies “whatever the cost” for as long as Portugal’s economy is impacted by the pandemic crisis.
Portugal said last month it is likely to cut its 5.4% growth forecast for 2020 due to a new lockdown. ($1 = 0.8252 euros) (Reporting by Sergio Goncalves; Editing by Alexander Smith)