- David Slotnick/Business Insider
- David Neeleman is best known for his role as either the founder or co-founder of a host of success airlines including WestJet, JetBlue, and Azul.
- Since 2015, Neeleman has been the co-owner TAP Air Portugal.
- Neeleman led a consortium of investors that successfully privatized the debt-ridden government-owned airline.
- TAP’s new management is working to build up Portugal as Europe’s newest gateway.
David Neeleman has a long history of success in the airline business. He’s either founded or co-founded four major airlines and is reportedly working on a fifth.
You may have heard of a few of Neeleman’s success stories like WestJet, JetBlue, and Azul.
Even though Neeleman has long departed WestJet and JetBlue, he is still involved in the day-t0-day operations of Azul, a burgeoning Brazillian low-cost carrier.
In addition to Azul, Neeleman is also a co-owner of TAP Air Portugal. In 2015, Neeleman led a consortium of investors called Atlantic Gateway in a successful bid to take over Portugal’s 73- year-old, government-owned national airline.
The consortium now owns 45% of the airline while the Portuguese government retains a 50% stake. The final 5% belongs to the airline’s employees.
Turning TAP around
At the time, TAP was in bad shape and heavily in debt. The airline suffered as a result of European Union regulations that frowned upon state-funded enterprises competing with private industry, Neeleman told us in a recent interview.
In the year prior to Neeleman and Co’s takeover, escalating costs due to fuel prices and labor problems only managed to compound the airline’s problems – forcing it to declare a loss of around $50 million.
“The way the airline was funded was basically the local Portuguese banks were taking turns putting money in the company,” Neeleman said.
- David Slotnick/Business Insider
Unfortunately, by 2015, that flow of money had pretty much been tapped out with the airline on the hook for more than $600 million in debt.
In addition, there was another $100 million of “critical receivables” including payroll that needed to be paid, Neeleman said.
And then there’s TAP’s product. Even though service quality and maintenance were good, the airline’s offerings were in dire need of investment.
“Because there had been no new airplanes purchased because there was no capital, the fleet was just very old,” he said. “It looked like you were flying around in the 70’s in the planes.”
As part of the takeover, the consortium agreed to invest as much as $900 million in the airline while working to return TAP to profitability.
“The first thing we did was put the money and made payroll and then we placed an order with Airbus for 71 brand new airplanes,” Neeleman told us.
By the end of 2019, TAP expects to its entire wide-body long-haul fleet to be either the brand new next-generation Airbus A330neo airliners or current generation Airbus aircraft with brand new refurbished interiors.
Airbus expected the A330neo to enter service during the last quarter of 2017. But development delays have pushed back the debut of the new plane and TAP’s turnaround plans.
In fact, the airline only took delivery of its first A330-900neo earlier this week.
Europe’s newest gateway
Along with the financial investment, Neeleman and TAP’s management team led by CEO Antonoaldo Neves have worked to transform the airline and its home base in Portugal into Europe’s newest gateway.
“Portugal is just so well positioned as a hub to bring people into Europe,” Neeleman said. “It’s only 3,300 hundred miles from New York. There’s no other major city on the European continent that’s closer than Lisbon.”
As result, the airline is positioned to connect large numbers of passengers from its sizable network in North and South America to destinations in Europe and Africa.
TAP already carries the largest volume of passengers between Europe and Brazil, Neeleman told us.
However, Neeleman also concedes that Portugal geography poses some challenges.
“The good news about Portugal is that it’s on the entrance to Europe, but the bad news about Portugal is that it’s far away from Europe,” Neeleman said.
To help boost Portugal’s prominence as a travel destination, TAP allows passengers to extend their layovers up to five days for free.