TAP's New Owners See Profits From 2016

The new owners of Portugal's flag carrier TAP expect the loss-making airline to return to profit next year due to new routes to Brazil and the United States and an investment of EUR€600 million (USD$672 million).

The Atlantic Gateway consortium made up of American-Brazilian aviation investor David Neeleman and Portuguese bus company owner Humberto Pedrosa will focus on boosting revenues rather than cost cuts, the two entrepreneurs said.

"This year it will be difficult to have a profit because of the crisis in Brazil and other things. But next year, when we've implemented our changes, we expect to have a profit, and post profits going forward," said Neeleman, who is the chief executive of Brazilian airline Azul.

He said TAP would add 10 new destinations in the United States, where it now has two - Miami and New York, and eight to 10 destinations in Brazil, where it already has 11. Many Europeans transit through Portugal to fly to Brazil because of the large number of slots TAP has on flights there.

The consortium has said it will buy 53 new Airbus aircraft for TAP. Neeleman said new orders would include 14 wide-body A330s and 39 narrow-body A321s.

TAP had a net loss of EUR€46 million last year, hit by strikes and fuel costs, after a profit of EUR€34 million in 2013.

TAP's Brazilian chief executive Fernando Pinto said the start of the year was worse than expected for the airline, but there were signs of improvement due to strong passenger numbers at the start of the summer travel season.

The new owners who won the June 11 tender to acquire a 61 percent stake in heavily-indebted TAP, will make a capital injection of EUR€345 million as well as EUR€250 million in pre-delivery payments for aircraft in 2016 and 2017.

Because of European Union state-aid rules, the government could not inject capital into TAP and opted to sell it.

"The total investment package is EUR€600 million, but it could go up to EUR€800 million," Neeleman said, without elaborating. The partners expect to obtain funding with the Brazilian development bank BNDES.

The sale contract encompasses the possibility of an initial public offering of TAP shares in the future. Neeleman would not say when that may take place, adding that the consortium had enough cash flow to proceed without issuing shares for now.