TAP Air Portugal CEO Luís Rodrigues talks with Window Seat about the launch of the airline’s long-anticipated privatization, long-haul development out of Porto and the challenges of growth with a constrained fleet and home hub.
Subscribe Now
Don't miss a single episode. Subscribe to Aviation Week's Window Seat Podcast in Apple Podcasts, Spotify or wherever you get podcasts.
Discover all of our podcasts on our at aviationweek.com/podcasts.
AI-Generated Transcript
Victoria Moores: Hello everyone and thank you for joining us for Window Seat, our Aviation Week air transport podcast. I'm Air Transport World Europe and Africa bureau chief Victoria Moores, and I'm delighted to welcome you onboard. This week I'm joined by our guest speaker Luís Rodrigues, who is the chief executive of TAP Air Portugal. Luís, welcome and thank you for joining us at such a pivotal time for TAP and we'll go into why that is in a couple of moments.
Luís Rodrigues: Thanks for having me here.
Victoria Moores: So first of all, let me introduce you to Luís, who became chairman and CEO of TAP Air Portugal in April 2023. But prior to that you've worked in all kinds of areas of business and industry including marketing, advertising, telecoms, consultancy services, and also as part of that for four years, between 2015 and 2019, you were an adjunct professor of economics and also chief executive of a business school in Lisbon. So you've got that broadness of experience into academia as well. Now in the aviation sector, you've also been president and chief executive of SATA Group. That was from 2020 through to 2023. So you saw that airline through the pandemic. You've been at TAP Air Portugal twice. So you're a board member in 2009 to 2014, and since 2023 you've been CEO of the airline. And I think it's probably helpful as well to give a bit of a grounding for our listeners that might not be as familiar with TAP Air Portugal. So to give a bit of background for the airline itself, the airline was established in 1945, had its first flight in September 1946. So I guess that means that you are approaching the 80th anniversary of TAP flying.
Luís Rodrigues: We did celebrate the 80th anniversary this year. Yes, March.
Victoria Moores: So obviously it's a pivotal time in terms of all kinds of reasons. You've grown the business to over 8,000 staff. You've got a €4.5 billion turnover, a fleet of around 80 Airbus aircraft, which is A320, A330 family, 86 destinations, 13 in Brazil, 101 nonstop routes. So obviously this is a significant business for the European airline industry and that pivotal moment that I just spoke about is the privatization. So we have just heard that the privatization of TAP Air Portugal has been relaunched by the Portuguese government and that's the moment at which you are joining us, Luís. So I imagine that the last few weeks have been incredibly busy for you. I wonder if you could just give us a flavor of what's been happening.
Luís Rodrigues: We have been working on the airline post-COVID. So I came at a significant, relevant moment. The airline was going through a number of painful moments in the middle of a restructuring process agreed between the Portuguese government and the European Union. So the past couple of years have been essentially restoring the core operational business and making it work and bringing people's morale up again because things were tough when we started. I think we have achieved those milestones, and I think the airline now—it's running properly considering the constraints that we have, which is a constrained infrastructure to start with. Constraint, air traffic space in all over Europe. It's not a Portuguese problem, it's all over Europe. It's very, very, very difficult. And the weather disruptions that we've been going through and the fact that we have stabilized everything at this point in time probably gave the shareholder Portuguese government understanding that this is the moment to get the process moving.
So the government has been quite busy with us in preparing the whole process to make sure that it runs properly, that once it starts, it only stops when the process is complete and it's not cut short. So that's essentially what we've been doing. Then we have been making sure that while the process of privatization runs and, as we know, it is a long one, we're talking years, the operation continues to deliver. We cannot have one causing problems to the other. So in a way we’re kind of separating the teams that are doing both things. Obviously, there cannot be total separation, but we need to make sure that the operation is run properly, efficiently, smoothly with good customer service metrics and whilst the administration of the privatization moves ahead as it should, so far so good. But we have just started, there are many milestones ahead. Day one of the privatization process formally is September 23, if I'm not wrong. I am sorry for that, but I was in a different, very different time zone and I'm still trying to adjust to the jet lag, but I think it's September 23, day one. It'll run for two months where everybody who is interested and meets the criteria will be having the opportunity to express their interest in taking part in the process ahead.
Victoria Moores: Yeah, like you say, it's quite a prolonged period. So we have that initial expressions of interest for 60 days. So I think that takes us through until about November where you'll even have those expressions of interest and then obviously running through the selection process. And I understand that the government isn't expected to select the winning partner until midway through 2026. So it really is early days in the process right now. What we are anticipating from the process is that the government has said that it wants specifically an airline strategic partner that has had a turnover of over 5 billion euros at least one year within the last five. So that really does narrow down the field of candidates that could potentially express the interest, participate in the process. And we've already heard airline groups like IAG, Air France-KLM and Lufthansa, all those obvious contenders in Europe have said that they are interested in the process. And I think that a part of the significance of TAP Air Portugal is your Latin American network. So looking at the figures, we can see that around 25.6% of capacity in September between the whole of the E.U. and Brazil was operated by TAP Air Portugal. And that really shows that measure of your network, how much you've developed in that area. And I'm wondering how that might evolve in terms of what you are looking at going forward for the airline.
Luís Rodrigues: I think, I hope we have a number of reasons why bigger groups may be looking at us in an interesting way, and that is probably the number one that our network to South America, particularly to Brazil, is very well-established. We are flying now right now to 13 different locations in the country, which nine are exclusive in the sense that we are the only airline connecting Europe to those cities, which as you can imagine is very much appreciated by the local communities. It would not make any sense whatsoever if somebody who comes will put that into question. I think whoever is coming is leveraging on that, making it even stronger, better, even more improved customer service and so on, because it's a significant asset. I don't see nobody questioning that strategy. It would not make any sense. Then obviously Portugal being the home market is a small one, so the traffic doesn't stop there, it essentially moves elsewhere. So, it's a hub. That's the concept of a hub. So we need to maintain our network, our connections to Europe overall and to Africa. And therefore, the network of the company is pretty well clear, is pretty well established and whoever is going to come will mostly, I think it'll mostly look for synergies in that process rather than cutting whatever—cutting costs or cutting routes. And I don't think that's going to happen trying to. So let's see. It's going to be an interesting discussion.
Victoria Moores: It definitely is to see how things shape up because we've seen significant changes more in terms of alliance membership for alliance that have been through consolidation already, like easyJet, like SAS and obviously what the airline looks like and the strategic direction and the focus can change depending on who those partners are. I'd like to focus on something there. And that's your constrained Lisbon hub. So obviously Lisbon is operating at capacity at the moment. You are also limited in your growth potential by the 99 aircraft cap that the European Commission placed on TAP as a result of the restructuring process over the last few years. So I'm wondering how do you grow under those circumstances?
Luís Rodrigues: Oh, it's a tough one. We grow marginally, we grow efficiently. We upgrade, which we've been doing over the last few years. There's a limit to that because we need to maintain a connection from the long-haul into the short-haul regional fleet. We have opportunities in, we have opportunities in Lisbon still. There's a group composed of several parties that are working to increase the number of movements that you can do in the airport. It's going to take a couple of years at least, because there are many different stakeholders who have a significant voice in that process. There's limited opportunities in with more opportunities in Porto as well. But for Porto to develop as a market, not the region of Portugal to develop as a market, which I think it will over the next year. So we are very keen on expanding the Porto business. And then there are cultural opportunities in other airports in our home market like Faro in the Algarve, but those are limited.
Victoria Moores: You mentioned Porto there. I mean you've been developing that as almost a parallel airport to Lisbon. Obviously it's much, much smaller in terms of operation, but you have been adding long haul operations out of that airport. And I'm wondering what potential you'd see to develop there given the capacity constraints that you've got at Lisbon.
Luís Rodrigues: Yeah, Porto still has room for growth. It's not only the northern part of the country but also a significant part of Spain, Galicia, and the inner area between Madrid and Portugal. I think the market is there, we just need to make sure we look at it as an investment process, thinking that one of the things that did not go properly in the past was that you start the route and after three months it's not delivering, you pull it off, that doesn't work that way. It's an investment like anything else. And you need a minimum amount of time, couple of years to three years to make sure that you give it an opportunity to work. And obviously you need to work to make it work. So it's not just start and let it go. I think it depends more on the effort that you make to make that succeed than anything else. So I think that process has been moving. We've been experimenting carefully with Porto and growing long haul a little bit more. And I think that process is going to continue given the constraints in Lisbon and the new airport that the government has announced is planned to take 10 years to be fully operational, if everything goes well. I hope it will, but then it is still a significant amount of time. So Porto is probably the main opportunity that we have to grow.
Victoria Moores: And I'm wondering how that translates into the passenger experience. So obviously you are working from a constrained hub. How can you keep operations in terms of passenger perception, keep meeting passenger expectations under those circumstances?
Luís Rodrigues: Well, it's not easy. I think when you think about it, we need to make sure we have operationally all the cushions in place to deal with the disruptions that happen more and more every day for enforcing circumstances. And over the next few months we'll be dealing with the introduction of the EES and ETIAS in Europe and in our country has been, as well, a tough learning process. We don't have the space in the airport where the systems are in place and there's wind of change in the passport control areas. That has been improving every day, but there's still some significant way to grow. I think at the end of the day, and making sure we do the best of our effort to be on schedule and having great customer service on board, which I think we do. We're very proud of the quality of our pilots and our crews and they became very relevant for us to succeed as an airline.
And then, I mean the team needs to keep thinking about new ways of coming up and delivering customer expectations. I'm sure you've heard more and more of pockets of overtourism in Europe overall. So that's an effort that not only the airline needs to manage, but also the authorities that deal with tourism need to be careful with that, because at the end of the day, airlines have very strong brands and if there's a poor experience anywhere in the airport down the road or whatever because the passenger bought the ticket to the airline, which he remembers the name, it's easy to blame it on the airline. They're very visible. They're up in the air every day. You can look at them and finger-point. And again, I think we are the only transport industry that has all these regulations and passenger compensations, which I'm not against, but I think we need to be careful with that. Yeah, lot of work ahead, never full of, never complaining about nothing to do.
Victoria Moores: That's part and parcel of the airline industry, isn't it? My final question before we wrap up, we haven't really particularly touched on fleet just yet. I'm aware that as part of the passenger experience, you have been upgrading your aircraft with Bluetooth connectivity, with more modern interiors as well. I'm just wondering what we can expect from TAP in terms of fleet renewal. You've got already around 80 aircraft in the fleet. You're bringing in A320neo family aircraft. You've also got the A330neos. What can we expect in terms of movement and potential fleet upgrades within the next year or so?
Luís Rodrigues: Well, we started back, the company has started back in 2016, a significant renewal process with Airbus. So there was a purchase agreement for 53 aircraft at that point in time, of which about 20 still need to be delivered. I think we now have one of the younger fleets in Europe, one of the most modern ones [which] is good. We just had the first aircraft with new cabins, new interior design, larger bins for bags, which we all know it's been an increasingly growing problem in the industry. That's a step in the right direction. It'll take time. So it's just one aircraft. So that process is to be completed still and still there's some way to go. Now having started the privatization process at this point in time, it could not make sense for us to change completely the strategy and not give the new partner, the new shareholder, a voice in that process because those are long-term implications that somebody will come [and] needs to be considered. So whilst we're doing the work we were doing on fleet renewal and we continue to do any significant moves, we have to have the agreement or input of the new shareholder.
Victoria Moores: Does that mean that the potential renewal of the TAP Express Embraer E1 fleet might be on hold until after the privatization?
Luís Rodrigues: I wouldn't call it on hold because we were not looking into renewing it proactively. Right now, I think the current 19 aircraft fleet still has some way to go and has been performing quite well. That would be a process that we would be dealing with over the next few years. But even the fact that, as you mentioned, well that the process has just started, whoever comes is going to have an input on that, it'll not make sense otherwise.
Victoria Moores: Absolutely. And I think that the bottom line is we need to watch this space over the coming months and through to next summer to see how that process evolves. And with it in mind that that has only just been launched and you are joining us at a very busy time. I really appreciate you joining us for the podcast today.
Luís Rodrigues: Thank you. Thank you for having me here.
Victoria Moores: Thank you. And also a huge thank you to you, our listeners, for following Window Seat and to our producers, Guy Ferneyhough and Cory Hitt. Please make sure that you don't miss us each week by subscribing to the Window Seat podcast on Apple Podcasts or wherever you listen. This is Victoria Moores, disembarking from Window Seat.
Related Content
