TAP’s second quarter shows strong operational and financial recovery

posted on 23rd August 2022 by Eddie Saunders
TAP’s second quarter shows strong operational and financial recovery

TAP is recovering from the crisis, with ASK, number of passengers and number of departures reaching between 81% and 92% of pre-crisis 2019 levels, while revenues reached 99% of their pre-crisis level in the second quarter of 2019 (“2Q19”).

PRASK increased by 80.7% and 8.5% compared to 2Q21 and 2Q19, respectively, with Load Factor increasing by 32 percentage points compared to 2Q21 to 80.4%, reaching 96% of pre-crisis 2019 levels.

There was a strong operating result in 2Q22, with positive EBIT and Recurring EBIT amounting to EUR 66.4 million and EUR 47.9 million, respectively, above pre-crisis levels.

The cumulative Net Income for H1 2022 was EUR -202.1 million, still clearly negative, but EUR 291.1 million better than in the same period of 2021 and improving quarter-on-quarter.

There is an increase in the liquidity position to EUR 889.8 million, guarding against the fact that the second semester is seasonally the largest consumer of liquidity.

Christine Ourmières-Widener, TAP Chief Executive Officer, said: “The second quarter saw very healthy demand and higher revenue per passenger, which allowed us to offset the increase in costs. Prospects for the fourth quarter and next year remain uncertain.

“The execution of the restructuring plan remains key.”

An analysis of operations in the second quarter of 2022 shows that the number of passengers carried quadrupled, compared to the same period of 2021, reaching 82% of 2Q19 levels.

Additionally, during this period, TAP operated more than twice as many flights as in 2Q21, or 81% of 2Q19 departures.

Capacity (measured in ASK) increased by nearly three times compared to 2Q21, with the Load Factor improving by 32 p.p. when compared to the same period of 2021, reaching 80.4%. Compared to 2Q19, ASK are at 92% and Load Factor at 96% of pre-crisis levels.

Operating revenues were almost four times higher than in the same period last year, increasing by EUR 597.4 million to EUR 830.6 million, representing 99% of 2Q19 operating revenues.

This was predominantly driven by increased fares and higher capacity, resulting in an increase in passenger segment revenues by EUR 586.4 million vs. 2Q21 to EUR 740 million and generating a PRASK of EUR 6.16 cents – an 80.7% improvement compared to 2Q21 and 8.5% compared to the same quarter in 2019.

The Maintenance and Cargo areas contributed to the increase in revenues with EUR 7.8 million and EUR 7.3 million, respectively. The Maintenance area ended the second quarter with revenues of EUR 18 million, up 76.9% on 2Q21. In turn, revenues in the Cargo area amounted to EUR 67.4 million, up 12.2% compared to 2Q21.

Recurring operating costs amounted to EUR 782.7 million, increasing by 92.5% compared to 2Q21. This significant increase reflects the higher level of activity, given an ASK increase of 166.5% during this period.

Compared to the same period of 2019, recurring operating costs were 4.1% lower, despite an increase in fuel costs of EUR 71.6 million.

The CASK of recurring operating costs recorded a 27.8% reduction compared to 2Q21 to EUR 6.52 cents, which also compares to EUR 6.25 cents in 2Q19 (i.e., +4.4%). Excluding fuel, the reduction in unit costs is even more visible, with CASK ex-fuel reducing by 45.4% vs. 2Q21 and 9.9% vs. 2Q19.

Fuel costs increased by EUR 217.5 million vs. 2Q21, or close to five times, to EUR 277 million. There was, nevertheless, a positive hedging effect of EUR 54.5 million, which partially offset the sharp increase in the market price of jet fuel observed during the quarter.

Recurring EBITDA, recorded for the fourth consecutive quarter a positive figure and reached EUR 156.8 million in 2Q22. This represents an increase of EUR 211.7 million compared to the same period in 2021.

Recurring EBIT reached EUR 47.9 million, an increase of EUR 221.4 million compared to 2Q21.

Considering non-recurring items, EBIT was positive by EUR 66.4 million (up EUR 216.1 million vs. 2Q21). Compared to 2Q19, Recurring EBIT and EBIT improved by EUR 29 million and EUR 50 million, respectively.

Non-recurring items, predominantly related to a release of provisions due to a reduced cost estimate for litigation and settlement risks related to the closure of M&E Brazil, in total had a positive impact of EUR 18.5 million on results.

Net Profit improved by EUR 47.6 million compared to 2Q21 to EUR -80.4 million, despite the negative net impact of foreign exchange differences of EUR 58.2 million resulting from the unfavorable evolution of the Euro versus USD.

The Balance Sheet showed a strong cash and cash equivalents position of EUR 889.9 million at the end of the quarter, increasing liquidity levels compared to both 4Q21 and 1Q22.

The cash position on 30 June 2022 was more than 1.5 times higher than at the same date in 2021, reflecting an increase of EUR 347 million.

The EUR 990 million contribution approved by the European Commission in TAP’s restructuring plan is still pending and is expected to be executed by the end of the year.

From an operational perspective, a total of seven destinations that were temporarily suspended were reopened (of which four are seasonal from the summer season), such as: Ibiza, Tangier, Djerba, Monastir, Alicante, Boa Vista and Caracas.

With the relaunch of Boa Vista, TAP Air Portugal resumes operations to all international airports in Cape Verde, and with the relaunch of Caracas, operations to all long-haul destinations are now restored.

Regarding the operational fleet, during the quarter, TAP recorded a net increase of three aircraft to 96.

On 30 June 2022, 66% of the medium and long-haul operational fleet consisted of NEO family aircraft (compared to 63% on 30 June 2021 and 27% on 30 June 2019).
First Half

Looking at the first half year-to-date, revenues reached EUR 1 321.2 million in the period, an increase of 245% compared to 1H21.

Together with the higher level of activity (ASK increased by 217%), operating costs also recorded a significant increase of 73% to EUR 1 316.8 million, leading to a positive EBIT of EUR 4.4 million, an increase of EUR 381.7 million compared to 1H21.

Recurring EBIT, excluding non-recurring items of EUR -3 million, was also positive at EUR 1.4 million.

Net interest and unfavorable currency developments, particularly in the second quarter, led to a Net Profit at EUR -202.1 million, still EUR 291.1 million better than in the same half of 2021 (“1H21”).