TAP sues bankrupt Swissair

in Business · 06-10-2001 00:00:00 · 0 Comments

The Portuguese government and TAP Air Portugal are preparing to take Swissair to court after it revealed it had no funds to pay the agreed compensation for unilaterally terminating a strategic airline partnership agreement. With the Swiss airline's shares having fallen 97 percent and a final legal decision still pending on its assets and debts, Portugal could be made to wait a long time before seeing any of the promised cash. The Swiss have made it clear that they have no money to pay TAP and will "understand if they are taken to court". The chairman of rival airline Portugália meanwhile warned that "Portuguese aviation is in danger of heading towards disappearing from the map".

TAP Air Portugal was this week plunged into disarray following the announcement that Swissair was on the verge of bankruptcy, despite having a received a cash injection of 660 million euros (130 billion escudos) from Swiss banks.
Besides the promised billions of escudos that were to be transferred from Zurich to Lisbon, TAP, through the Qualiflyer programme is structurally reliant on the manpower provided by Swissair to passengers travelling around Europe.
The Minister of Transport and Public Works, Ferro Rodrigues meanwhile presented the possibility of the "government and TAP taking legal action" in order "to best serve and defend TAP's interests." The Swiss company, which confirmed it has no money to pay TAP, said on Wednesday it "perfectly understands the Portuguese government's position in wanting to defend its interests".
TAP is currently faced with the problem of restructuring its code-share agreement with Swissair, which permits passengers to pay the Swiss airline for flights with TAP. The code-share agreement is however limited to the routes Lisbon-Zurich, Oporto-Geneva and Oporto-Zurich. Both Swissair and TAP have been accepting payments from passengers for flights on other routes with the respective partner airline. According to TAP spokesman António Monteiro, a passenger who paid Swissair for a flight on TAP from New York to Zurich via Lisbon will "have a problem" and will therefore be obliged to purchase a new ticket and hope to be reimbursed by the ailing Swissair.
Portugália chairman João Ribeira do Fonseca meanwhile criticised the government for not yet having set up contingency plans to avert a potential collapse in the national aviation industry, adding that Portuguese airlines were en route to disappearing totally from the market. In addition, as is the case with TAP, Portugália is in line for a compensation package from Swissair for breach of contract. The agreement will however only have been broken once Swissair makes a definite announcement on its bankruptcy and subsequent withdrawal from commercial aviation.
Shortly prior to the announcement of Swissair's imminent insolvency, TAP revealed that it recorded a nett profit of 2.1 billion escudos (10.5 million euros) during the month of August. Due to this positive result, TAP has managed to reduce its accumulated debt to 9.7 billion escudos (48.3 million euros). TAP had at the beginning of the year forecast an accumulated debt figure of 10.9 billion escudos (54.3 million euros) by the end of 2001. But in the week following the terrorist attacks, TAP recorded losses of 400 million escudos (two million euros) due to flight cancellations.
The TAP administration has meanwhile revealed that given recent developments, it will be the following the example set by rival European airlines in increasing its fares. No definite figure has yet been presented, though observers expect a rise in fares of between 1,000 and 1,500 escudos (five and ten euros).
PGA-Portugália has already decided to increase international fares by five percent, but confirmed that domestic flights will maintain existing fares.
TAP chairman Fernando Pinto has meanwhile tried to minimise the effects of Swissair's closure. Speaking to reporters late Wednesday he said he "did not imagine any problem" to arise out of this situation. He however added that TAP would be making an announcement on a possible alliance with another airline by the end of the year.


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