Azul Linhas Aéreas informed the Brazilian Securities and Exchange Commission (CVM) that it is charging TAP Air Portugal a debt of 90 million euros related to a bond issue carried out by the Portuguese airline.
The fixed income securities traded abroad could be converted into shares of the airline, but that would not be possible due to the nationalization of TAP in 2020.
The loan was made in 2016, when the management of TAP was transferred to the Atlantic Gateway consortium, formed by the Portuguese investor Humberto Pedrosa and the founder of Azul, David Neeleman.
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The new shareholders issued debt worth 120 million euros, of which Azul was responsible for 90 million euros.
Including interest, TAP’s debt to Azul will reach 189 million euros in March 2026, when the loan term ends.
According to Azul, TAP did not fully comply with some clauses set out in the loan and a notification from the Brazilian company to its Portuguese counterpart had been made in July.
TAP’s response did not please Azul, which asked for “minimum parameters for a possible agreement” so as not to require further action. It also hired a European law firm to advise it in the negotiations.
End of code-sharing between TAP and Azul?
One of the actions would be the termination of the code-sharing agreements between the two companies.
The partnership involved agreements for sharing and distributing flights, loans and the transfer of aircraft, such as the A330-200 and E-Jets to the Portuguese carrier.
The matter comes to light amid the liquidity crisis that Azul is currently experiencing. Despite an out-of-court settlement reached last year, the company has been facing high debt and a high exchange rate of the dollar against the Brazilian currency.
In a new round of renegotiations, Azul is proposing to convert US$600 million of its debts with lessors into shares and issue US$800 million in debt, using Azul Cargo as collateral for the loan.
The dispute with Azul could affect the Portuguese government’s plans to privatize TAP, since this debt could make the sale of the company unfeasible.
John Rodgerson, CEO of Azul, has reportedly contacted potential parties interested in taking over TAP to comment on the debt.
