Brazil’s Azul Sells Its 6% TAP Air Portugal Stake

The Brazilian carrier Azul SA agreed with the Portuguese government to sell its stake in the Portuguese airline TAP. This information comes after the European government announced it is taking a more significant stake in TAP. Let’s investigate further. 

David Neeleman is out, so is Azul

Yesterday, the Brazilian-American entrepreneur David Neeleman backed out of its stake in TAP Air Portugal. Originally, Neeleman owned, through his consortium Atlantic Gateway, a 45% stake in TAP. Before the agreement, the Portuguese government held a 50% stake, and the employees of the carrier the remaining 5%.

As we know, David Neeleman is also the founder of the Brazilian low-cost carrier Azul. 

Azul sold its indirect 6% stake in TAP. This stake was worth approximately $12.15 million, said the carrier in a statement seen by Simple Flying. Additionally, the Brazilian airline will not exercise the right to convert 90 million euros bonds into equity. 

In the first quarter of 2020, the value of Azul’s TAP investment decreased to $937 million due to Covid-19. 

John Rodgerson, CEO of Azul, said, 

“Like many other airlines worldwide, TAP has been severely impacted by the Covid-19 crisis. With the aid provided by the Portuguese government, we can ensure the continuation of TAP, thereby guaranteeing the integrity of our bond.”

In the first quarter of 2020, TAP lost $443 million. 

Portugal thanks David Neeleman

The Portuguese government played with the idea of TAP’s nationalization. In the end, the government and the shareholders of the carrier agreed in a different strategy. As reported yesterday, Neeleman sold his stake in TAP for $62 million and will remain part of the company until his bonds expire. After that, he will have his investment returned to him and will no longer operate in any stakeholder capacity. 

The Infrastructure Minister of Portugal, Pedro Nuno Santos, recently thanked David Neeleman for all that he did in TAP Portugal. As reported by the Portuguese State Agency Lusa, he added, 

“It is undeniable: the entrance of David Neeleman in TAP was important for the carrier. I don’t want to be unfair with a stakeholder that knows so much about the industry. He is successful worldwide, and has contributed so much for this airline.” 

Neeleman entered TAP back in 2015. At that moment, he paid almost $400 million and outbid the Colombian businessman and former Avianca owner, German Efromovich, for TAP. During his tenure, TAP renewed its fleet. In 2019 alone, the carrier received 30 new aircraft. 

Is Azul near a merger?

Coming back to Brazil, Azul Linhas Aereas is also in an unstable situation. A few weeks ago, Azul signed a codeshare agreement with long time rival LATAM Brazil. 

The agreement includes 50 non-overlapping domestic routes to/from Brasilia, Belo Horizonte, Recife, Porto-Alegre, Campinas, Curitiba, and Sao Paulo.

In July, Azul expects to operate up to 240 daily flights, compared to the 168 daily departures it had in June. Additionally, Azul is adding six domestic destinations, totaling 66 cities served. Before the pandemic, Azul operated 950 daily departures. 

But, the outlook in Latin America remains bleak. Three major airlines in the region have filed for Chapter 11 bankruptcies in the US, and more will likely follow. According to regional specialists, either GOL Linhas Aereas and Azul may be the next airlines to follow LATAM, Avianca, and Aeromexico’s footsteps. But Azul may also consider a merger in the future, even though, both LATAM Brazil and Azul deny any merger talk. 

Do you expect to see a merger soon? Let us know in the comments.