Portuguese airline TAP says turnaround on track despite fuel costs, FX

LISBON (Reuters) - The restructuring at Portuguese airline TAP, designed to bring it back to profit in the next few years, is on track despite soaring fuel costs and the dollar's appreciation against the euro, its chief executive said on Tuesday.

"We are implementing the (restructuring) plan, which will create a new and rejuvenated TAP," Christine Ourmieres-Widener told a parliamentary committee.

The airline, 72.5% controlled by the Portuguese state, was saved by a 3.2 billion euros ($3.4 billion) rescue plan approved by Brussels. It has reduced its fleet, cut more than 2,900 jobs and lowered wages.

After posting a record loss of 1.6 billion euros in 2021 due in part to the closure of its aircraft maintenance business in Brazil and a weaker euro, TAP aims to achieve positive operating results in 2023 and a net profit in 2025.

One of the key challenges is that this year's estimated fuel costs are now 300 million euros higher than previously forecast and their impact is yet to be felt in what remains of the year, the CEO said.

Ourmieres-Widener said TAP was operating at 90% of its pre-pandemic levels, but warned the economic outlook was getting weaker and there was a risk that current strong demand could slow down again.

After two years of pandemic-curtailed travel, airlines globally have made a come back in recent months, riding a wave of pent-up demand that has encouraged them to boost capacity. But the industry's recovery faces risks from a surge in global jet fuel prices, after Russia's invasion of Ukraine.

"It is not because we are flying at 90% of 2019 capacity that we are in a good financial position, we have not recovered yet. We have a plan to recover. Recovery means generating positive net income," Ourmieres-Widener told lawmakers.

($1 = 0.9349 euros)

(Reporting by Patrícia Vicente Rua Editing by Andrei Khalip and Mark Potter)