Interview with the Chairman of the Executive Board of Directors
In 2007 TAP achieved record results of more than 32.8 million euros. What was the “recipe” for achieving these results?TAP has grown significantly, having managed to acquire in the market four A330 and also received the first aircraft of this model purchased directly from Airbus. The growth of the fleet enabled a significant expansion of the offer and the start of flights to new destinations, which constituted timely opportunities that had to be seized.
I can mention, as examples, the start of the operation to Brasilia or the increase in connections to Luanda, Rio de Janeiro or S. Paulo, all of which turned in immediate positive results.
In addition to the actual growth of TAP, we also integrated PGA, with which we initiated the combined operation in the last six months of the year, which has already brought positive contributions. PGA had been accumulating losses over the last few years, having posted losses of almost 60 million euros. In the first six months of operation with TAP, that trend was inverted and PGA posted losses of no more than three million euros, contributing with a superior value towards the generation of revenues, in terms of an increase in traffic, to TAP’s operation.
We also initiated, in 2007, an intense effort to improve the punctuality and luggage delivery indicators, for which a strategy based on the creation of a Customer Service Department was established.
The year started very well in terms of results. For the first time, the losses reported until May were very small, compared with the historic results of TAP.
That helped us reach the summer in a more balanced position and we attained very important gains until September.
We were concerned, in October and November, because there was a very strong reversal, with some movements and disturbances in the operation, which had some impact.
We had to consolidate the negative results of the Handling operation, which also influenced our results. Finally, in the last few months of 2007, oil prices began spiralling upwards.
In spite of all these factors, it is important to mention that the final global result was quite positive.
Did the factors you mentioned – the belated operating integration of PGA, the start of the upward spiralling of oil prices, the losses of Groundforce, the disturbances to the operation in October – distort the results that could have been achieved?
It’s very difficult to say. I think TAP could have posted even better results, if PGA had initiated its integration closer to the beginning of the year, if we hadn’t had the disturbances that we had in the month of October…
Fuel also weighed on results. The price had been rising for quite some time, but we managed to obtain good results in the hedging operations last year, so that the influence of oil prices was not as significant as it could have been.
In answer to the question, in general terms, the result could have even doubled, which would have been very positive.
Was TAP’s performance also affected negatively by the operating difficulties at Lisbon airport?
In spite of the large investments that are being undertaken, there are some constraints to the operation at Portela airport.
In 2007, with the growth of TAP’s operation and the operating problems with our associated company Groundforce, we had some difficulties that we managed to solve. Today, thanks to a much more integrated working relationship between TAP, Groundforce, ANA and SEF, we are improving in many aspects, such as punctuality and baggage delivery.
TAP achieved, in 2007, some indicators that place it among some of the most efficient companies in Europe?
When compared with the average of European companies – and I make that comparison based on a few factors such as cost per available seat kilometre (CASK), or per passenger kilometre (CRPK), as well as several other forms of cost comparison -, we are very well positioned, we have costs that are below the average of AEA companies. Thus, we are actually very efficient, because we have grown in the last six years, we have doubled in size, the Company grew its offer 98% and passenger demand also increased by roughly the same values.
There was, therefore, sustainable growth, but what is most important is that the Company organised and restructured itself internally, so as to make such growth possible and, at the same time, achieve significant efficiency gains.
All of the Company’s areas achieved important gains, but I underline TAP Serviços and Maintenance & Engineering.
In this area, for example, we maintained a constant number of employees over the last few years, but if we observe that the number of aircraft increased from 35 to 52, and that we have the same number of employees, we confirm the large efficiency gains.
If we examine all areas of the Company, we will find significant increases in efficiency, and it was mainly that which allowed us to achieve the positive results.
2007 was also the year in which large investments were made, such as the acquisition of a larger participation in VEM or the acquisition of PGA…
Those are, indeed, the large investments in 2007. In VEM, we had 50 per cent of the company that controls 90% of the organization, we acquired the remaining 50 per cent from the other partner and gained control of a company that is very big, 2.5 times bigger than our Maintenance & Engineering area, and is situated in one of the highest growth markets, also in air transport, at a global level.
We are well positioned in this market, but the idea is not to maintain 100 per cent of the company that controls VEM, it never was. Our intention is to find a strategic partner that can help us bring more customers to VEM. We are undertaking a profound restructuring of the company, we have had very significant gains in service quality, delivery deadlines, number of customers and customer satisfaction… We have achieved significant progress.
As for PGA, it comprises an important step, it was a necessary investment to continue TAP’s growth process, but the objective is for PGA’s own results to sustain that investment.
The integration of PGA in Grupo TAP was accomplished with low social costs, with the maintenance of the majority of work posts and the integration of PGA employees in TAP’s staff. Was that important?
Yes. We made a decision, at the beginning of 2007, of not taking on anyone at TAP, so as to then take advantage of many people that worked at PGA and that could not continue to work there. There was a reduction in work posts, unfortunately, but we offered those that left the possibility of considering solutions with a redeployment company. The social aspect concerned us significantly and care was taken with regards to that issue. In the area of pilots, cabin crew and maintenance staff, PGA even grew, because the operation grew.
In what mood did the year of 2007 end and what projects did you prepare, at the end of that year, for 2008?
I expect 2008 to be a year of consolidation of all these results. In 2007, we had the highest result ever, but I have stated that it was still very small, corresponding to only about 1.5 percent of TAP’s total revenues.
The goal for 2008 would be working with the investments already made and trying to boost the Company to grow in terms of results, so as to have the capability to reward employees better.
Unfortunately, with the severe increase in the cost of fuel, there is a huge change in what we had anticipated.
Was 2007 your best year at the helm of TAP to date?
It was the best year of TAP to date. Personally, every year that I have spent at the helm of TAP was “the best”, overcoming very tough challenges.
All the obstacles we overcame during that time contributed towards uniting the work team even more. I must thank all my management colleagues on TAP’s Executive Board of Directors, the members of the General and Supervisory Board and, in particular, the employees as a whole. They brought the dream of a stronger TAP closer to reality.
