TAP Air Portugal post record profit, ITA Airways cuts losses

TAP Air Portugal posted a record profit of 177.3 million euros in 2023, up by just under 112 million euros compared to 2022. TAP carried 15.9 million passengers in 2023, up 15.2%, but still lower than before the 2019 health crisis.

Meanwhile, Italy’s ITA Airways reduced its loss to 5 million euros last year, down from 486 million euros a year earlier. Lufthansa was able to avert an impending strike.

Privatization deferred?

In the fourth quarter, however, TAP suffered a loss of 26.2 million euros due to increased staff costs (+148 million euros, or 121%). The airline recently started raising salaries after cutting them in 2021 and reducing its workforce.

But over the whole year, this is the most significant net profit recorded by TP, whose revenue exceeded 4 billion euros for the first time. TAP was renationalized in 2020 as a result of the Covid-19 crisis.

The Portuguese government injected 3.2 billion euros into the company, accompanied by a negotiated restructuring plan with the European Commission that is in force until 2025.

The socialist government also announced in late September the privatization of at least 51% of TAP’s capital, which attracted the interest of competitors such as Air France-KLM, Lufthansa, and the IAG group (British Airways and Iberia).

Meanwhile, there have been new elections, and the cards are different again. The center-right won those and supplied the new prime minister, Luis Montenegro, whose government will take office on April 2nd. In this context, privatization in 2024 seems complicated, as TAP’s chief executive, Luis Rodrigues, has already indicated.

ITA Airways rebounds

In contrast, ITA Airways, the Italian airline created in 2021 after the bankruptcy of Alitalia, managed to cut its loss to 5 million euros last year. A year earlier, it made a loss of 486 million euros.

Revenue rose 58% to around 4 billion euros. Passenger numbers also rose sharply: by 47% to 14.8 million. This year also promises to look bright: ITA Airways plans to increase the number of aircraft to 96 by the end of this year, thanks to the arrival of 26 new planes.

EU veto pending

Meanwhile, the deal with Lufthansa remains to be finalized. The Italian state and Lufthansa agreed on Lufthansa’s entry almost a year ago. The Germans would invest 325 million euros for a 41% minority stake, with an option to fully acquire ITA Airways in the medium term.

However, the deal has yet to get the European Commission’s approval, and that’s where the rub is. Earlier this week, it was revealed that the Commission has reservations about Lufthansa’s entry. A European veto on the operation is possible if Lufthansa does not meet several concerns.

Lufthansa and ITA must now submit solutions by April 26th. The Commission’s concern is that the deal would restrict competition on air routes between Italy and central Europe, the United States, Canada, and Japan.

Meanwhile, Italy’s far-right Deputy Prime Minister and Transport Minister Matteo Salvini have already complained of Euro-madness. “After many years were wasted, the government wants to make the jobs of thousands of workers safe, ensure the Italian people’s right to fly, and welcome tourists to Italy, and Brussels objects to it,” Salvini said. “I believe it is because economic interests are behind it.”

Strike averted at Lufthansa

And as with Brussels Airlines, parent company Lufthansa managed to avert a threatened strike at the last minute. Things had been clashing between Lufthansa and a union representing around 25,000 staff for some time because of a wage dispute.

Recently, ground staff laid off work, canceling hundreds of flights. However, after complex negotiations, both parties agreed, averting the strike threat during the Easter holidays.

Details of the agreement have not yet been made public. The union demanded a 12.5 pay rise for a one-year term for the new collective agreement. However, Lufthansa, Europe’s leading airline, previously did not want to offer more than 10% more pay combined with a 28-month term.

Lufthansa cabin crew, who also went on strike in early March, have still not reached a salary agreement with management.