Airline's Net Income Falls 92 Percent as One-Off Tax Hit Wipes Out Operating Gains at Portugal's Flag Carrier

TAP Air Portugal reported a net profit of just EUR 4.1 million for 2025, a dramatic 92 percent decline from the EUR 53.7 million recorded in 2024. The headline number, however, masks a business that the airline insists is fundamentally sound heading into its long-awaited privatisation.

A Tax Adjustment, Not an Operational Collapse

The bulk of the decline stems from a one-off corporate income tax (IRC) adjustment worth EUR 42 million, triggered by Law 64/2025, which progressively reduces Portugal's IRC rate. That forced the airline to revalue deferred tax assets on its balance sheet. Strip out the adjustment and TAP's recurring net profit would have been EUR 46 million — broadly in line with its recent trajectory.

"In 2025, TAP delivered solid results, supported by resilient demand across the network, particularly in the second half of the year, and a significant contribution from the Maintenance business," CEO Luís Rodrigues said in a statement released on Wednesday.

Revenue Up, Costs Up More

Operating revenue rose 1.2 percent to EUR 4.313 billion, driven by an increase in ticket sales and a 10.7 percent jump in maintenance revenue. Capacity grew 3.1 percent and passenger load factor climbed to 84.2 percent, up 1.9 percentage points year on year. TAP carried more passengers on more flights, and filled its planes more efficiently.

But costs grew faster. Recurring operating costs reached EUR 4.07 billion, up 3.6 percent, as traffic costs rose 6.7 percent, staff costs increased 7.9 percent, and depreciation climbed 10.8 percent. A 5.4 percent drop in fuel costs provided some relief, but not enough to prevent margin compression. Revenue per available seat kilometre fell 2.3 percent to 6.96 cents, reflecting greater competition on key routes and macroeconomic pressures in the North American market.

Recurring EBITDA came in at EUR 742.9 million with a margin of 17.2 percent, while recurring EBIT stood at EUR 243.4 million with a 5.6 percent margin.

Fourth Consecutive Year of Profit

Despite the steep headline decline, TAP has now posted positive net results for four consecutive years — a streak that would have been unthinkable during the depths of its 2020 restructuring, when the state injected EUR 3.2 billion to keep the airline flying. The European Commission confirmed in 2025 that TAP had met all operational requirements under its restructuring plan and restored long-term viability.

Privatisation Bids Under Review

The results land at a sensitive moment. Non-binding bids for up to 49.9 percent of the airline closed last week, with Lufthansa and Air France-KLM the two remaining contenders after IAG chose not to submit a proposal. State holding company Parpública now has roughly 30 days to assess the offers before the government issues invitations for binding bids.

For 2026, the carrier is projecting disciplined growth focused on its transatlantic network — particularly routes to Brazil — and expansion of operations from Porto. Fleet modernisation with Airbus NEO aircraft will continue, and the airline expects higher load factors and improved unit revenue despite increased capacity.

Whether the underlying operational strength is enough to attract a premium bid from either European carrier remains the central question as Portugal's most politically sensitive privatisation enters its decisive phase.

Sources: ECO, Observador, Euronews, Lusa