Fuel price hikes plunge TAP Portugal 44 million into the red

PORTUGUESE carrier TAP Portugal ended the first half of 2005 44 million euros in the red, up 25.7 per cent on last year. It means that the airline’s debt has risen from 35 million euros in the red from the same period last year.

The cause – the spiralling price of petroleum, which is poised to reach 70 US dollars per barrel.

Michael Conolly, TAP’s financial vice president presenting the company’s results last week, said the first half of the year had been very difficult because of the rise in fuel prices worldwide. “Fuel expenses have risen by around 45 per cent compared with the same period in 2004, going from 83 million euros for six months to 118 million euros,” he said.

The steep climb in prices cannot be offset by an increase in passenger volume, which rose around eight per cent for the same period. The bill for jet fuel, or kerosene, represents one fifth of the airline’s total costs, which reached 584 million euros, rising 10 per cent on the same six-month period last year.

Conolly said that without taking the fuel prices into account, the airline’s overall costs had only risen around 4.2 per cent, which is a considerable gain in efficiency and shows that the airline is being well run by its chief executives, Fernando Pinto and Manuel Pinto Barbosa.

The improvements in TAP’s financial performance, not counting the fuel prices, was due to the decision to offload – sell – TAP’s handling operation in 2004, removing around 2,600 employees off TAP’s payroll, representing 27 per cent of the former workforce. Another important saving was made when the airline decided to reduce the commissions paid to travel agents.

Operational profits soared by eight per cent from 560 million euros to 605 million euros in the first half of the year, while the company’s air transport debts fell from 32 million euros to 29 million euros, although maintenance and engineering costs rose from 1.5 to 1.9 million euros.

Despite the rise in fuel prices, the company is continuing to reduce its accumulated debts from 647 million euros at the end of 2004 to 635 million euros at the end of June 2005.