Caretaker Portuguese Government Approves TAP Sale

Portugal's outgoing government has given final approval for the sale of loss-making airline TAP to avoid the carrier's imminent collapse, despite objections.

Treasury Secretary Isabel Castelo Branco said the final agreement for the sale of a 61 percent stake in TAP to a consortium made up of American-Brazilian aviation tycoon David Neeleman and Portuguese bus company owner Humberto Pedrosa would let them recapitalise the company sooner than initially agreed.

"The agreement for the conclusion of the sale allows to hasten the capitalisation operation, with EUR€150 million injected immediately, with another EUR€120 million to be paid until June 2016," she said, adding that the investment was needed urgently.

Under the initial deal signed in June, the Gateway consortium had up to one year to put EUR€270 million into the company which has debt of over EUR€1 billion.

A day after the ousting of the centre-right government with the help of its far left allies in parliament, the Socialist Party on Wednesday asked state holding company Parpublica to halt the privatisation of TAP as it considers that the state cannot lose control of the airline.

The Socialists and their allies seek to put an end to years of austerity and reverse various privatisations. Left-wing politicians were quick to label the decision as unlawful considering the government's caretaker status.

But caretaker cabinet minister Luis Marques Guedes argued that the prospect of "imminent collapse at the treasury" of the state-owned company made the final approval of the deal a pressing matter of state, and thus within the competence of the outgoing government.

He also said the deal signed did not imply any penalties for the state in case it had to be reversed.

"At most, the money would have to be returned. Everything will depend on the moment and reasons for the reversal, and its dimension," he said, referring to the Socialist plan to keep a 51 percent stake in TAP.

Under European Union rules, Portugal cannot inject state aid into the airline.