The “moderate” possibility of extraordinary support from the Portuguese Government also contributes to the score.

“We now expect TAP to generate adjusted EBITDA of at least 900 million euros this year, compared to our April forecast of 770 million to 780 million euros, supported by stronger-than-expected profitability in an environment of robustness in air passenger transport”, states the rating agency in a statement.

The airline recorded recurring EBITDA (earnings before interest, taxes, depreciation and amortization) of 752.4 million euros in the first nine months of the year. S&P considers that the record result “may not be sustainable beyond 2023, due to the expected pressure from rising costs on the margin”, but anticipates that 2024 will be above that recorded in 2022.

This is the second review of TAP's rating in less than a month. At the beginning of November, Moody’s improved TAP’s debt risk rating by one level, from “B2” to “B1”, highlighting the “strong and continuous improvement in the airline’s operational profitability”

S&P warns that TAP's reduced fleet, restricted by the restructuring plan, and congestion at Lisbon airport “will limit the growth potential” of results in the medium term. On the other hand, “the high profitability rates should alleviate the pressure on TAP's expenses that comes from higher fuel costs, together with the rise in European carbon taxes and high inflation”.

The agency revised TAP's “stand-alone credit profile” upwards from “B+” to B”. Since it “maintained its position on the moderate possibility of extraordinary support from the Portuguese government”, the long-term rating, the most significant for investors, was raised one level from “B+” to “BB-“.

The outlook for TAP's assessment is “stable”, which reflects the “expectation that passenger traffic will remain at pre-pandemic levels over the next 12 months, assuming that macroeconomic or geopolitical conditions do not deteriorate unexpectedly and tariffs remain close to recent levels.”

“The stable outlook also depends on our assumption that privatisation will not change our assessment of the moderate probability of extraordinary financial support from the Portuguese government”, S&P also points out.