Azul has filed a lawsuit in Lisbon seeking €189 million (US$217 million) from TAP Air Portugal, escalating a long-running dispute over a 2016 convertible loan and adding uncertainty ahead of the airline’s planned partial privatization.
The Brazilian carrier argues that the debt — originally about €90–97 million — was never repaid and has since grown with accrued interest and fees. TAP, however, has sought to reclassify the instrument as a shareholder loan, a distinction that could reduce or eliminate its repayment obligations under Portuguese law.
The case stems from financing provided during TAP’s restructuring a decade ago, when the airline was controlled by Atlantic Gateway, a consortium led by entrepreneur David Neeleman, Azul’s founder, and Portuguese businessman Humberto Pedrosa. Azul says the agreement included guarantees that should bind the operating airline, even after subsequent corporate restructuring.
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Complicating the dispute is the dissolution of TAP’s former holding company, TAP SGPS, now known as Siavilo, which is in insolvency proceedings. Azul maintains that liability extends to TAP Air Portugal itself, citing contractual protections and past recognition of the debt in official filings and shareholder discussions.
The lawsuit comes at a sensitive moment. Portugal’s government has set an early April deadline to receive non-binding offers for a 44.9% stake in TAP, with Air France-KLM, Lufthansa Group and IAG among potential bidders. Prospective investors have already signaled concerns about outstanding liabilities, and a negative court ruling could weigh on the airline’s valuation, estimated at around €700 million as a starting point.
Azul has pushed for a resolution before the privatization advances, arguing that unresolved financial disputes introduce risk into the transaction. CEO John Rodgerson has said the airline will pursue the claim aggressively despite having recently completed its own Chapter 11 restructuring in the United States.
For Azul, recovering the funds would provide a meaningful boost to its balance sheet after cutting more than $2 billion in debt during its restructuring. The airline is now operating in a competitive Brazilian market, facing strong pressure from LATAM and Gol across domestic and international routes.
The legal battle also carries political overtones in Portugal. Previous government statements have at times acknowledged the legitimacy of the claim, while others have denied any state responsibility for liabilities linked to the former holding structure. That ambiguity has complicated efforts to reach an out-of-court settlement.
With the bond reaching maturity earlier this year without payment, the dispute is now likely to proceed through the courts unless a political or negotiated solution emerges. In the meantime, the case adds another layer of complexity to TAP’s privatization, as investors weigh both operational prospects and legal exposure.
