- 80% of last year's losses intended for initiatives essential to the transformation of TAP in view of sustained future profitability.
- TAP reached a new sales record in 2018 of €3.25 billion (+ 9.1%) and a new passenger record of 15.8 million (+1.5 m).
- The effect of the increase in jet fuel prices in 2018 contributed negatively by increasing costs by €169 million.
- Growth in 2019 lead to the hiring of 500 additional people, continuing on with the investment in hiring made in 2018 of more than 1200 people, bringing a total of 1700 new employees.
The 2018 results (and revenue percentage) compares with a profit of €21 million (0.7% of revenue) in 2017 and losses of €28 million (1,2% of revenue), €156 million (6.3% of revenue) and €85 million (3.0% of revenue) in 2016, 2015 and 2014, respectively.
Revenue increased by 9.1%, more than double of its main European competitors (which grew on average if +4%), mainly due to the increase in the number of passengers carried (+8.2%) and TAP's Maintenance and Engineering revenue (+26.1%).
A growth that incorporates not only the expansion of the US market (+10%) but also, negatively, the effect of the Brazilian exchange rate devaluation (-16%), which caused a decrease in revenue in TAP's main foreign market.
In the segment of TAP Maintenance and Engineering in Portugal (+55% growth), we highlight the sale of third-party engine maintenance services, which grew significantly (+70.1%) from €108,8 million in 2017 to €185.1 million in 2018.
The total operating costs grew by 14.7% in 2018, mainly due to the existence of extraordinary and non-recurring costs. The extraordinary costs due to irregularities are a consequence of the cancellation of 2490 flights which led to the contracting of replacement airplanes with crews and the payment of compensation to passengers in the amount of about €41 million.
Subsequent to this period, union agreements were reached that ensure social peace in the company over the next five years.
In 2018, a pre-retirement and voluntary exit program was also implemented in Portugal. The costs associated with these outflows (reflected in full in 2018 accounts) were €26.9 million, although the better part of this amount will be paid over the next 10 years. The pre-retirement program will allow TAP, in the coming years, to reduce costs by more than €20 million.
TAP ME Brazil (which represented large transfers of funds over the last few years) was finally restructured, costing €27.6 million (redundancy of more than 1,000 employees and the closure of the Porto Alegre operation). For 2019, it is expected that TAP ME Brazil will finally present positive results and will not require any transfer of funds.
Fuel expenditures increased from €580 million in 2017 to €799 million in 2018. Only about €50 million of this increase was due to an increase in volume, with the remaining €169 million or so resulting from the price increase effect for which the company was not protected due to a lack of credit limits and a robust hedging policy.
The average oil price rose 32% between 2017 and 2018, which hadn't happened since 2011. For 2019, with the new hedging policy and better credit ratings, the company has about 50% of its expenditures protected at a competitive price when compared to that of its main European competitors.
In 2018, TAP made a strong investment in the client at various levels (new site, better handling of complaints in the call center, new services in economy class, new frequent passenger program). As a result of this investment, the level of client satisfaction (NPS) has consistently improved.
TAP's main priority has been to improve punctuality, which has led to investments in reserve aircraft, integration of operations and related departments, new processes, and other measures.
2018 was also the year of TAP's fleet renewal with the arrival of new aircraft (37 by the end of 2019 and 71 by 2025), which represents a significant increase in comfort for the passenger and also considerable fuel savings for TAP.
It is this renewal and growth of the fleet that has allowed the Company to announce new destinations and more flights. Only in 2018, TAP began selling flights for 17 more routes with a focus on North America (San Francisco, Washington and Chicago), which remains the Company's main bet.
Also in 2018, TAP again invested in human resources (more than 1200 new employees).
In the same period, a large cost-cutting program was initiated, which allowed for a savings of about €115 million in 2018. A new distribution model was implemented as well as a new approach to financing (with international banks favoring greater liquidity, which increased +39% at the end of 2018.