TAP—Air Portugal Transportes Aéreos Portugueses S.A.

Edificio 25, Aeroporto de Lisboa
P-1704 Lisbon Codex
Portugal
Telephone: (+351) 1 841 5000
Fax: (+ 351) 1 841 5095
Web site: http://www.tap-airportugal.pt

State-Owned Company
Incorporated: 1945 as Transportes Aéreos Portugueses
Employees: 8,500
Sales: $900 million (2000)
NAIC: 481111 Scheduled Passenger Air Transportation; 481112 Scheduled Freight Air Transportation; 49211 Couriers; 48819 Other Support Activities for Air Transportation; 611512 Flight Training

Lisbon-based TAP—Air Portugal Transportes Aéreos Portugueses S.A. (TAP) is a national air carrier with routes to Europe, North, South, and Central America, and Africa. In 2000, TAP flew five million people to 58 destinations. TAP belongs to that class of European state-owned airlines that has constant difficulties turning a profit, although the carrier has seen considerable revenues and traffic growth. From its beginnings, TAP has retraced the steps of Portuguese explorers with far-flung routes across Africa, and later the Atlantic. The airline loses money on these flights. TAP also has significant cargo and maintenance operations.

Origins

TAP Air Portugal was created on March 14, 1945 with the original name of Transportes Aéreos Portugueses. TAP was not Portugal’s first airline; Aero Portuguesa, half owned by Air France until 1943, had been created before the war. It flew a single route to Tangier until it was closed down in 1953.

Lisbon had been an important airport for trans-atlantic air crossings during World War II, though the Portuguese aviation industry was too small to exploit it. TAP would later benefit from the wartime construction of an airfield at Sal Island in the Cape Verde group. As a division of the Secretariat of Civil Aeronautics, TAP’s first mission was to explore possible commercial air routes.

TAP’s first planes were the Douglas DC-3s that started many an airline after World War II. The first commercial service of Lisbon to Madrid, operated in conjunction with Iberia Airlines, began on September 19, 1946, when TAP became a scheduled airline in its own right. The “Imperial Line” from Lisbon to Luanda (Angola) and Lourenzo Marques (now Maputo, Mozambique) was initiated on the last day of the year. This route, one of the longest undertaken by DC-3s on a scheduled basis, required twelve overnight stops.

Uniquely, scheduled international services commenced in force before domestic services. A Lisbon-Oporto route had been operated briefly in 1945 by a small airline that had been started late in the war, Companhia de Transportes Aéreos (CTA). TAP took over these operations in July 1947. A new plane type, the C-54 Skymaster, was delivered the same year. Routes to Paris, Seville, and London were added between 1947 and 1949.

The airline soon needed more cash to maintain its expanded network. The government partially privatized TAP in 1953, attracting investments from banking, shipping, and mercantile firms. Routes to Tangier and Casablanca were started the same year. The C-54s soon replaced the DC-3s on these flights, which now traversed the Sahara, dramatically shortening flying time.

A pair of Lockheed L-1049G Super Constellations were put into service on the Imperial Route in November 1955. Even with these state-of-the-art aircraft, the flight between Lisbon and Mozambique took 22 hours. By 1957, the Super Connies were being used on the Paris and London Routes, and TAP had ordered three Vickers Viscount plans for medium-length routes. The Douglas DC-3s that had launched the airline were taken out of service in 1959. Historian R.E.G. Davies’s May 1962 listing of world airline fleets allots TAP three Douglas DC-4s, three DC-6s, and five Lockheed Super Constellations.

TAP was a rather small airline in the early 1960s. Its share of the intra-European air market was less than one percent. However, the carrier’s operations were far-reaching. TAP began service to Brazil in cooperation with Panair do Brasil in the 1960s. Its routes to Africa were supplied feeder traffic by two local airlines, DTA and DETA.

TAP in the Jet Age

TAP briefly leased Comet 4B jets from British European Airways (BEA) in 1961 for use on the London-Lisbon route. It soon switched to French Caravelle jets, however, which were first used on the Lisbon-Madrid route in 1962. By the next year, the jets were replacing the Super Constellations on the African line. Caravelles also launched new routes to Frankfurt, Geneva, and Munich. TAP installed its first flight simulator to train crews for the Caravelle but ordered another model jet in the same year, the Boeing 707.

In 1964, TAP established or regularized operations to Sal, Bissau, and Funchal (Santa Catarina). Flights to the U.S. began in 1965 with the delivery of TAP’s first Boeing 707. These planes also took over the Johannesburg route while Caravelles were switched to Lisbon-Brussels. Finally, the B707s were used briefly on the “Friendship Flight” service from Lisbon to Rio, which ended in 1967.

By the end of 1967, TAP had retired all of its propeller-driven planes, creating Europe’s first all-jet commercial fleet. Zurich, Copenhagen, Buenos Aires, Salisbury, Amsterdam, and Sao Paulo were added to the network as the airline adopted the industry trend of computerized yield management. A Boeing 707 simulator was installed in 1969.

Also in 1969, TAP launched a new subsidiary, Transportes Aéreos Continentals for air taxi services (this closed in 1985). TAP became half owner of the airline SATA, based in the Azores, when it was restructured in 1972.

A suite of new facilities was opened at Lisbon Airport in 1971, including TAP’s new headquarters, a new hangar, and training centers. Montreal was added to the route network. In 1972, TAP’s first Boeing 747 jumbo jets were delivered; within two years, TAP was the only European airline capable of overhauling the JT 9-Ds engines that equipped its 747s.

TAP was nationalized in 1975. Boeing 727 airliners entered its fleet the same year. In 1976, TAP began flying to Caracas, Venezuela, and Milan, Italy, with the Boeing 707s and 727s, respectively, while Kinshasa was added to the African route. Unfortunately, TAP suffered a horrific accident in November 1977 when a Boeing 727 overran a wet runway in Funchal, Portugal, killing 131 people. Nevertheless, Air Transport World gave TAP its “Technical Management Award” in 1978 as Lyon and Luxembourg were added to the European network.

A New Image for the 1980s

TAP became known as TAP Air Portugal as part of a corporate identity makeover in 1979. A new logo, a new aircraft paint scheme, and new uniforms were part of the package. A unique exhibit of all the airline’s uniforms opened at the Costumes Museum in 1981.

New destinations for 1980–1981 included Rome, Barcelona, and Manchester. The airline began a reflecting program. The Boeing 707 and 727 aircraft were replaced with more advanced and more flexible Boeing 737s and Lockheed L-1011 Tristars in 1983. The massive Boeing 747s proved difficult to fill to capacity and were also replaced. The same year, the U.S. Federal Aviation Administration certified TAP as a full service maintenance provider; a contract to overhaul 35 of Federal Express Corporation’s Boeing 727s soon followed. Meanwhile, a hospitality subsidiary was created, dubbed Hotel and Restaurant Management, S.A., or “ESTA.” Air Portugal Tours was created the next year (1984). TAP carried more than two million passengers in 1984 and introduced the new Navigator business class.

In January 1986, TAP announced plans to float 49 percent of charter subsidiary Air Atlantis on the Lisbon Stock Exchange. However, these did not come to fruition, and the unit was later dissolved at a loss.

In 1987, TAP ordered more Boeing 737s, but also ordered A310s from Airbus. These planes began arriving in 1989. A slew of new destinations were added in 1987 through 1989: Athens, Munich, Vienna, Toronto, Dublin, Hamburg, Nice, Stockholm, Stuttgart, Curaçao, Newark, Toulouse, Dakar, and Abidjan. TAP ordered two extra long haul airliners, A340s, from Airbus in 1989, and installed a Boeing 737 flight simulator.

Restructuring in the 1990s

The annual passenger count exceeded 3 million in 1990, and the fleet continued to expand to accommodate this growth. In 1991, TAP was reorganized as a Sociedade Anónima, or public limited company, with the Portuguese government holding most of the shares.

New routes added between 1991 and 1993 included Berlin, Bordeaux, Bologna, Oslo, Stockholm, and Tel Aviv. However, the global recession that erased airline profits worldwide in the early 1990s did not spare TAP, which accumulated losses of Esc 100 billion. In 1993, TAP was spending Esc 15 billion a year on lease payments for its 38 planes. After experiencing cash shortages, TAP cancelled an order for four Airbus A340s and shut down its Air Atlantis charter subsidiary.

Government plans to sell up to 49 percent of the airline did not materialize just yet, however, although United Air Lines and others expressed some interest. Plans to reduce the workforce from 10,500 to 9,000 by the end of 1993 were met with strikes.

Company Perspectives:

In 2000 TAP Air Portugal carried over 5 million passengers and over 80 million Kg of goods and mail. The present network covers some 58 destinations in Europe; North, Central, and South America; and Africa. The TAP Air Portugal fleet is made up of 4 Airbus A340s; 5 Airbus A310s; 2 Airbus A321s; 7 Airbus A320s and 16 Airbus A319s.

The Strategic and Economic-Financial Plan (PESEF) was initiated in 1994. The development of new products was a central part of the turnaround. TAP took a stake in the Air Macau start-up airline. TAP also cut some routes and began flying North Atlantic routes in cooperation with Delta Air Lines of the U.S. A new food service subsidiary, Cateringpor, was launched. By this time, TAP had thoroughly overhauled 150 aircraft for Federal Express.

To help turn the airline around, the Portuguese government agreed to inject Esc 180 billion ($1 billion) into the carrier over four years, a proposal that was approved by the European Commission contingent upon TAP’s restructuring. Project TAP 2000 was launched in 1995 with the aim of modernizing the company; i.e., making it more efficient while simultaneously upgrading the fleet. Manuel Ferreira Lima became TAP’s new chairman in February 1996.

In 1996, TAP ordered 22 Airbus aircraft worth Esc 70 billion ($456 million) to update its medium haul fleet. In 1997, it installed a flight simulator for its Airbus A319, A320 and A321 planes. The total fleet was cut to 31 planes, and staff had been reduced 30 percent to 7,400 employees.

In 1997, TAP entered a strategic alliance with Swissair, which promised a stream of steady traffic from a successful partner. As part of TAP Air Portugal’s repositioning within the European market, Chairman Manuel Ferreira Lima in 1997 hinted at dropping the “TAP” moniker from the airline’s name, a plan which was not immediately adopted.

The restructuring efforts and Portugal’s recovering economy were showing results in the form of profits for the year 1997—the airline’s first in nearly two dozen years. TAP earned $8 million after accumulating $730 million in losses since the beginning of the decade.

In 1998, TAP logged its second consecutive profit, Esc 1.6 billion on operating revenue of Esc 155 billion. This came in the face of striking pilots’ demands for higher wages.

TAP continued to order new Airbus aircraft in 1998. The carrier was a founding member of the Qualiflyer Group alliance with Swissair and Austrian Airlines. The airline also began code-share operations over the South Atlantic with upstart Transbrasil. Cooperative marketing agreements proliferated in the following year. A new route to Cuba was added in 1998 as talk of privatization began in earnest. Merger talks with domestic rival Portugalia were unproductive, and that carrier announced its public stock offering in September 1998.

Refinements such as new traditional Portuguese dishes upgraded TAP’s in-flight service in 1999. At the beginning of the year, the carrier banned smoking on all European and North American routes. TAP placed a half a dozen new Airbus aircraft into service in 1999.

The “Modernization of the Organization” Project (MOP) of 2000 reorganized TAP into Airline, Handling, and Maintenance business units. A new charter company, Linhas Aéreas Charter, was created in January 2000 in partnership with Abreu Viagens. TAP created alliances with LAM (Mozambique Airlines), PGA-Portugália, and Finnair during the same year. Portugalia was a privately owned airline that also competed with TAP on certain domestic and international routes. Traffic counts pushed past 5 million passengers in 2000.

In February, the government announced a privatization plan in which SairGroup—Swissair’s parent—would take a 34 percent holding in TAP. Swissair agreed to pay Esc 31 billion ($150 million) for the stake. Pilots and other employees were also to be given 10 percent ownership in the airline modification to the deal announced in June 2000. However, in February 2001, SairGroup withdrew from the agreement.

Fernando Pinto, a former chairman of Brazil’s VARIG airline, was given that post at TAP in November 2000. Losses for the year were $100 million. TAP was aiming to halve these in 2001 and break even in 2002.

Principal Subsidiaries

Air Portugal Tours; Linhas Aéreas Charter (51%).

Principal Operating Units

Airline; Handling; Maintenance.

Principal Competitors

Iberia Líneas Aéreas de España S.A.; Portugalia.

Key Dates:

1946:: TAP begins flying to Spain and Mozambique.
1953:: Portugal partially privatizes TAP.
1961:: New jets begin to extend TAP’s route network to the Americas.
1975:: TAP is nationalized.
1983:: Overhaul and maintenance operations are certified by the FAA.
1994:: Cash-starved TAP launches a turnaround plan.
1997:: TAP sees its first profit in 20 years.
2000:: SairGroup agrees to take an equity stake in TAP, but later rescinds.

TAP—Air Portugal Transportes Aéreos Portugueses S.A.

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TAP—Air Portugal Transportes Aéreos Portugueses S.A.

Edificio 25, Aeroporto de Lisboa
P-1704 Lisbon Codex
Portugal
Telephone: (+351) 1 841 5000
Fax: (+ 351) 1 841 5095
Web site: http://www.tap-airportugal.pt

Origins

TAP in the Jet Age

A New Image for the 1980s

Restructuring in the 1990s

Company Perspectives:

In 1998, TAP logged its second consecutive profit, Esc 1.6 billion on operating revenue of Esc 155 billion. This came in the face of striking pilots’ demands for higher wages.