EU Commission Endorses Portugal’s €462 Million Support to Compensate Portuguese Air Transport

The European Commission has approved a support measure of €462 million for the Portuguese Air Transport (TAP) in line with the EU State aid rules in order to compensate the airline for the damage it suffered due to the COVID-19 outbreak between March 19 and June 30, 2020.

“This measure will enable Portugal to compensate TAP for the damage it suffered as a direct result of the travel restrictions that Portugal and other destination countries had to implement to limit the spread of the Coronavirus. Separately, our assessment of the restructuring plan for the company submitted by Portugal is ongoing,” the Executive Vice President Margarethe Vestager said, commenting on the Commission’s approval of the aid.

TAP is a branch of Transportes Aéreos Portugueses SGPS, SA (TAP SGPS), a company under the Portuguese State control, which except for TAP, owns other companies operating air passenger, transportation of goods, catering maintenance, and repair activities in Portugal and Brazil. In addition to being the largest branch of TAP SGPS, it is the largest airline in Portugal too.

Only in 2019, the company covered more than 50 per cent of the arrivals and departures at the Lisbon International Airport. Therefore, being a major operator and employer in the country.

In a press release issued by the European Commission, it is explained that Portugal informed the Commission regarding the aid measure to compensate TAP for the damage suffered due to the imposed restrictions on the travel and tourism sector to prevent the spread of the COVID-19 pandemic.

The support will be given in the form of a €462 million loan, which can be converted into capital and granted to TAP in one or several instalments, AtoZSerwisPlus.com reports.

To make sure that there will be no overcompensation, Portugal is required to review the measure and report to the Commission on the amount of the damage suffered, followed by verification in reference to the audited accounts of the company.

“Any public support received by TAP in excess of the actual damage will have to be returned to Portugal,” the Commission notes in the press release.

Furthermore, the Commission explained that the measure was evaluated under Article 107 (2)(b) of the Treaty on the Functioning of the European Union (TFEU), which allows the Commission to approve State aids aimed to compensate different companies and sectors for the damages caused by exceptional occurrences.

The Commission considers the outbreak of the COVID-19 as an extraordinary event having a significant impact on the economy. Thus, interventions by the Member States are justified.

Additionally, the Commission revealed that the measure for the Portuguese airline is proportionate with the damages caused by the Coronavirus, and it does not exceed the amount needed to recover the damage.

Previously, the Commission approved France’s €4 billion financial support to recapitalize Air France. Another €400 million were approved to offer support to companies in the Netherlands providing travel services in terms of the Coronavirus pandemic outbreak.