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TAP Portugal: will its 2012 annual report help to sell the company?

Analysis

TAP Portugal's 2012 annual report, published at the end of Jul-2013, gives food for thought to anyone interested in bidding for Portugal's national airline.

The bad news is that the group made another net loss, its balance sheet was woefully under-capitalised, with high debt levels and negative equity, and labour productivity was mediocre versus European peers. The Portuguese Government has reiterated its intention to re-launch the privatisation process in 2013.

So how should the Government tell the story to prospective buyers? The good news is that losses narrowed, cash flow improved and net debt fell. Moreover, RASK increased, ex fuel CASK remained under control and labour productivity improved.

Further gains could be made, for example through higher load factors and more headcount reductions and, perhaps, by focusing the long-haul network even more sharply on its Latin American niche. In addition, heavily loss-making non-core businesses should be sold or closed. More time may be necessary to demonstrate progress is being made.

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