Pilots had announced during the early hours of Thursday morning that they would be staying away from work for ten days after deliberating for several hours about the need for industrial action.
The confederation for Portugal tourism said on Thursday afternoon that the news of the planned strike was already having a negative effect on bookings, while TAP predicted the action would cause damage impossible to undo.
Profit comes before a loss
The airline, which endured many years of financial hardship during the first decade of the century, had registered five successive years of profits up until the end of the 2013 financial year.
But marred by botched plane purchases and a series of strikes in 2014, TAP has once again seen its accounts plunge into the red. With losses back on the cards for 2015 due to extraordinary events such as the pending strike action, it is unlikely bidders will have been overly generous in compiling an offer to purchase the airline.
But as they did last December, pilots have kept the back door open and told the government and the airline’s administration that they are willing to back down.
But pilots said they would only return to the cockpit should the government agree to offer them a share of the company and reinstate a longevity subsidy which saw longer serving pilots paid extra for their loyalty.
But both these demands, with the first being suggested by some observers as equating to between 10 and 20 percent of the airline being handed to pilots, would see the company’s accounts take an inevitable hit and cement losses for 2015.
Ground chaos
The pre-strike warning, once formalised, is set to cause unprecedented chaos on the ground. Schedule changes to flights are also expected to last for days after the completion of the action. While planes have taken off in the past during labour unrest, with the airline operating with skeleton staff and temporary workers, most, if not all aircraft will remain grounded should pilots fail to clock in for work, who are harder to cover by bringing in outside staff.
Following the news, TAP CEO Fernando Pinto decided to write to pilots following the news of the strike action warning them of the adverse affects it will have on the company and its long-term future.
Recent estimates by the airline point to immediate losses of 5 million euros for every 24 hours of strike action, but more costs will be added due to the rescheduling of flights and assistance provided to passengers, especially those who find themselves unable to return home to Portugal from far-flung destinations.
While the festive season strike was called off at the last minute, 2014 was the worst year for the airline in terms of labour action, with a record amount of days spent by TAP employees away from airports.
This was also reflected in the company’s negative operating results, with workers, and especially pilots stressing that the only way the airline will be profitable again is to heed to their demands which would cost less than the financial damage caused by strikes. In addition, industrial action will also affect the bottom line potential buyers are willing to pay, especially as there has been very little interest shown, at least publicly, by potential investors.
Privatisation set for take off
According to the TAP CEO, the losses of 46 million euros suffered during 2014, will not impact on the privatisation process.
Fernando Pinto said that the financial results of the company in 2014 have not dampened enthusiasm by those apparently keen to invest in the airline.
“We do not have any reports of a loss of interest,” he said during the presentation of the results, the last to be given before privatisation occurs.
The losses reported by TAP were put down to a combination of factors, not least the delay into service of six new planes for the fleet, 22 days of strike action last year and operational incidents.
Fernando Pinto said that while potential interested parties had enquired why the company had generated so much time hitting the headlines over a particularly bad summer season, he believed that situations such as these “happen” and would not be repeated.
Pinto said that thus far, apart from some damage to the brand, the company “was working on recovering” the privatisation process, which had, to date, seen a number of presentations made and informal talks held.
However, with a second phase of the privatisation process starting, the CEO said the company would engage in more formal contacts in the run-up to the 15 May deadline for submitting binding bids before dismissing any discussion as to those potentially interested or their numbers on the grounds of confidentiality.
Workers forced to work
But the strike action set for next month, should it go ahead, is likely to a see a repeat of the Council of Ministers taking the uncommon step of evoking a civil requisition. This will be solely to soften the full blow of the strike, which could ground hundreds of thousands of passengers.
Given that both parties remain resolute in their stances – the Government refusing to budge on TAP’s privatisation process and the airline’s employees refusing to back down – a civil requisition seems a strong possibility in order to exercise damage control.
Prior to the festive season being called off, the Council of Ministers had ordered a civil requisition, an order unprecedented since 1997.
A civil requisition, under Portugal’s constitution, comprises a range of measures that may be imposed by the government with a view to assuring the regular functioning of essential services that are in the public interest or in the interest of sectors that are vital to the nation’s economy.
Last December, the government said of its decision that it was to “assure essential services in defence of the nation’s public interest and that of sectors vital to the nation’s economy.”
Such a decision will empower the government to summon striking pilots to work to ensure minimum services are upheld in the name of national interest.
A civil requisition was last used within the context of TAP by the-then Prime Minister António Guterres in 1997.
But even when workers are summoned, they can choose not to turn up, provided they justify their absence, which leaves the government in a no-win situation five months from the general elections and having challenged the right to strike enshrined in Portugal’s relatively young Constitution.
Passengers but no planes
The airline’s troubles first started last summer when it had to cancel 48 flights after planes failed to arrive to cover operations to many new destinations.
These glitches came at a time when the TAP Workers’ Commission accused the company of cutting corners in order to gloss its accounts as it sought a buyer in its long-running privatisation quest.
Speaking to The Portugal News in the summer, TAP refuted the claims by the Workers’ Commission, saying “operational safety is the first of TAP’s priorities and is incorporated into all operational areas of the company.
“Technical problems or breakdowns occur on a daily basis all over the world”, the company argued, but added that “flight safety and maintenance at TAP is on the same level as the best practices in the industry for which the airline is recognised and praised internationally.”
TAP further revealed that many rival airlines opt to use the Portuguese flag carrier’s maintenance crews to service their flights due to the high standards practised in Lisbon.