Company currently operates 74 weekly flights in Brazil and is undergoing restructuring
10/25/2022
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Carlos Antunes — Foto: Divulgação/Claudio Gatti
With an eye on the growth in demand for international travel, TAP Air Portugal, the second-largest international airline in Brazil in terms of seats offered, will be able to reach its pre-pandemic supply level on the São Paulo-Portugal route by the end of this year for the first time since the beginning of the pandemic.
This is the estimation of Carlos Antunes, the company’s director for Latin America. The pandemic has led the group to a major restructuring, supported by financial support in the order of €2.3 billion – the company is likely to receive more €900 million soon, according to Mr. Antunes.
The company currently operates 74 weekly flights in Brazil. But the crisis caused by Covid-19 made the operation shrink dramatically. “In São Paulo, we got to the point we had one flight a week,” recalled the executive, about the most challenging moments of the pandemic.
“One of the group’s strengths is Brazil, the second most important market after Portugal. Of the total passengers we transport from Brazil, 45% go to Portugal and the rest go to other destinations via connections,” he said.
TAP has the second-largest share of the Brazilian market among international airlines, with 11.7% of demand (measured in revenue passenger kilometres or RPK) in the year through August – it loses only to Latam, which holds 15.2% of demand, according to data from the National Civil Aviation Agency (ANAC).
The Portuguese airline has gradually resumed its offer and in the end-of-year festivities it will add one more flight in the Guarulhos-Lisbon direction, totaling 21 per week – the same it operated in 2019. From São Paulo, the company has also already recovered its three weekly flights to Porto.
But the group still has challenges ahead. It currently operates 74 weekly flights in Brazil, or 84% of its pre-pandemic level – in 2019, there were 86 flights. By the end of the year, the estimate is to reach 89%. Since March the group has resumed flying to all of its 11 destinations in Brazil – the last was Porto Alegre.
TAP’s overall operating revenue in the second quarter was about four times higher than the same period last year, totaling €830.6 million. The figure is equivalent to 99% of the revenue for the same period in 2019, before the pandemic. At the end of the quarter, however, the group was still left with a net loss of €80.4 million. Part of the loss comes in the face of higher costs, in addition to the depreciation of the euro.
The company is 100% state-owned. It had David Neeleman, founder of Azul, as a shareholder until 2020. In the last years, TAP is undergoing a restructuring after receiving a €2.55 billion contribution from the European Commission to overcome the crisis. More €900 million euros are expected soon, said Mr. Antunes.
Part of the group’s strategy is to divest assets. As a result, the company closed its aircraft maintenance operation in Galeão (Rio de Janeiro), whose warehouse, the largest in Latin America, was taken over by United.
The challenge today is to understand the new behavior of the clients. On the leisure side, the demand is strong, according to the executive. On the corporate side, demand is between 70% and 80% of pre-pandemic overall.
“Companies have learned to work remotely. And they are still working with a restricted budget. In 2023, we are going to see a supplement of corporate budget for travel,” he said.
The purchasing curve, which used to be around three months in advance, is now around 45 days. “The traveler is still insecure about whether in three months we will have some political or health event,” he said. The international trip, he said, ends up competing for space in the household budget with the replacement of a car or house renovation.
Another challenge for the airlines is to manage the rising costs, which are reflected in more expensive tickets. The executive said that before, the ticket to Europe used to cost something like $600, while today it is $800.
“The problem is that the real has devalued a lot. So before you paid something like R$3,500 on the ticket and today it is almost twice this amount,” he said. Looking ahead to the second quarter of 2023, the executive pointed out that tickets are starting to approach pre-pandemic prices, but in dollars.
*By Cristian Favaro — São Paulo
Source: Valor International