TAP - Unlikely, Unpractical and Unnecessary - Positioning

All,

Please find last week's analysis on TAP here.

The thesis remains unchanged from our mail last week, but the comments in parliament from Prime Minister Antonio Costa - even if only mere promises - go some way to alleviate any concerns stirred up by the CFO’s resignation last Friday.

Very Advanced Stage:

- Well, they better be. On our model, TAP will need fresh cash this year. Perhaps the carrier can push its weight around for a short while, but the lifeline thrown by the Equity injection in May is finite.

- Upside to operations comes from the recent wave of openings for travel between Europe and Brazil. Europe opened late to Brazil for the summer - perhaps in part on protectionist grounds, to keep tourism in the region. Perhaps because of actually high coronavirus levels in Brazil. Nonetheless, the opening of borders to South America should be a major driver for TAP bookings.

Dates european borders openned to Brazil:

- Portugal 01/09/2021

- Spain 24/08/2021 (Beat Portugal by a week!)

- France 17/07/2021

- Germany 22/08/2021

- Italy ?

- UK 11/10/2021

- Switzerland 26/06/2021

- Iceland 30/07/2021

- Ireland 27/09/2021

- The Netherlands 16/09/2021

- Finland 30/07/2021

- Estonia 27/09/2021

- Belgium 30/09/2021

- Albania 23/09/2021

- Liechtenstein 26/06/2021

- Check Republic 01/09/2021

- Romania 16/09/2021

- Serbia 14/07/2021

Positioning:

- We are adding another 1% of the 24s at 83c/€ to bring the position to 4% of NAV. We see a restructuring of the NY Law bonds as unlikely, unpractical and unnecessary. Upside of this trade will not be par. The bonds will likely see themselves diluted quite heavily and positive EBITDA is some time away. We think (pre-IFRS16) leverage will be 5.5x on a 2024 EBITDA

Please contact us to discuss,

Wolfgang

E: wfelix@sarria.co.uk

T: +44 203 744 7003

www.sarria.co.uk