The confusion continues at TAP. David Neeleman announced on Monday that the airline urgently needs the money from a proposed bond issue of €150 million and that he already has arranged for his €120 million contribution to be injected this week.
The government claims to be unaware that these funds are inbound, despite being a 50% shareholder in TAP, and has no plans to inject the balance of €30 million as outlined in the original bond issue plan.
Neeleman also said that he believed the decision of the Civil Aviation Authority (ANAC), to reject the State’s sale of 61% of TAP to Gateway, (owned by Neeleman and Pedrosa – and latterly by China's Hainan Airlines), will not upset things.
The Chinese cash is inbound through an investment in Neeleman’s ‘Azul’ airline and onward to TAP through Gateway, unbeknownst to the government which seems adrift in the fast moving world of airline finance.
Neeleman will use the urgency of the financial problems at TAP to try and gain some leeway with the rules that prevent non-European majority ownership of the airline and which now may preventing the government injecting its €30 million part of the bond issue.
We are back to the position used as an excuse by the Passos Coelho coalition government when rushing the sale of TAP in the first place - that TAP is on the point of collapse and needs funds urgently.
With the bond issue funding set up and ready to go, Neeleman’s plan is now to talk to the ANAC from a position of power and to persuade the authority that Gateway really is controlled by Pedrosa, hence there should be no worry that a non-European in fact is pulling the strings.
This needs to happen because Pedrosa is Portuguese and Neeleman is an American born in Brazil.
Neeleman’s rather shaky stance is that nine of the eleven members of the TAP board are European and Humberto Pedrosa is in the TAP office “two or three times a week," hence TAP is controlled by Europeans.
David Neeleman said that TAP’s losses last year were the biggest in the last 15 years, some €150 million higher than he expected. By forcing Gateway’s €120 million onto the TAP balance sheet, Neeleman will be hoping the government is unable to stump up its €30 million obligation.
The negative decision by ANAC, that Neeleman really controls Gateway rather than Pedrosa, means that precautionary measures and restrictions now are in place that prevent the airline’s management taking any big decisions which may have a “materially significant impact on the assets, the activity and operation of TAP and Portugalia,” without the prior approval of the ANAC.
The major bond issue in progress certainly comes under this umbrella but Neeleman says that the decision was taken before the ban on this sort of decision came into play, so the bond issue refinancing for TAP can go ahead.
The State, businessmen and the regulator are all coming at TAP from different angles. Many observers will be forgiven for developing a feeling that Neeleman is getting himself into a position whereby he controls TAP, using his own and Chinese money, can behave anyway he wants, and will leave the Portuguese government wondering quite what happened.
Should Neeleman succeed in shedding the government as a 'partner' he may go on to do great things with the business. If he fails, the taxpayer is underwriting the losses anyway so Neelman could win either which way.
