S&P lifts TAP

S&P said it raised its ratings on Transportes Aereos Portugueses SA and its senior unsecured debt to BB- from B+.

“TAP's higher-than-expected air passenger fares will translate into strong earnings this year. In the first nine months of 2023, the average yield (passenger revenue divided by revenue passenger kilometers [RPK]) increased 12% year over year, after a 17% increase in 2022. This was supported by uninterrupted and strong demand on all TAP's major long-haul routes to destinations such as Brazil, North America, and Portuguese-speaking Africa, as well as Portugal's position as a popular leisure travel destination,” S&P said in a press release.

S&P is forecast adjusted EBITDA of at least €900 million for full-year 2023, compared with our April forecast of €770 million-€780 million, which was similar to €778 million in 2022.

However, the agency warned, “We believe this record-high EBITDA may not be sustained beyond 2023 given expected margin pressure from cost inflation. We also think that TAP's downsized fleet and its highly congested major hub in Lisbon will limit significant top-line growth potential in the medium term.”

The outlook is stable.

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