TAP: 150 million euros cut from costs

  • ECO News
  • 7 October 2016

TAP’s new savings program was presented last Tuesday to its employees. The plan includes meals paid in-flight and more “automated” services.

TAP will implement their savings program to cut down 150 million in costs. These are the news given by the airline’s CEO Fernando Pinto in a staff meeting in the company’s headquarters last Tuesday. In spite of the cuts, TAP assures no one will be made redundant and we will witness growth.

"There is no hidden agenda. No one will be made redundant or have their wages cut; there will only be growth.”

Official spokesperson for TAP to ECO

The program, called RISE, was brought forward by the Boston Consulting Group, after they concluded the airline would only become sustainable in the long run if it were to cut down between 150 to 200 million euros in costs until 2020.

The growth stopped, and TAP now must get ready for a new leap. Every company was able to reduce their tariffs by means of a greater efficiency.

Fernando Pinto, TAP's CEO

In the meeting, Fernando Pinto highlighted some of the challenges faced by TAP, namely: a downturn in their four main markets (Portugal, Brazil, Africa and Europe); low competitiveness in tariffs; the “difficulty” of investing in new and more up-to-dated aircrafts because of debt (887 million euros are currently being renegotiated); and the “strong competitiveness of low cost airlines”.

Shares hold by TAP and low cost companies in Lisbon’s Airport (2012-2016)

Source: TAP

Within this context, TAP must enter the “virtuous cycle of winners in the aviation industry”, a goal that will only be achieved with fewer costs compared to competitors, greater investment in aircraft and product, as well as greater commercial activities and revenue.

Therefore, some services like handling will be automated, and the menu in coach will be smaller, introducing meals paid in-flight. The RISE program predicts a new “flight crew management system”, “maximizing the infrastructures” in the maintenance segment.

Oil devaluation will also contribute to saving up to 220 million euros in fuel, which should improve TAP’s results; nevertheless, Fernando Pinto highlighted the company must be ready for “the recovery of oil price”.

The program will also create 11 new routes for next year’s summer:  seven to Europe, three to Africa and one to North America. Flights to Brazil will be more frequent and trips to the Autonomous Regions of Madeira and the Azores, Oporto and Faro will be increased. TAP Express, service routes between Lisbon and Oporto, will have “an additional growth”.