Azores Airlines Sale in Jeopardy as Jury Recommends Rejection, Bailout Risk Looms

The Azores Regional Government has signalled that it may veto the sole bid for Azores Airlines, a move that could leave Portuguese taxpayers on the hook for further bailouts and keep the carrier in public hands well beyond the European Commission’s 2026 deadline.

Why This Matters

• €453M state-aid clock is ticking – Brussels demands a sale by 31 December 2026 or Portugal risks having to repay emergency funds already injected into the SATA group.

• Inter-island fares and seat availability could fluctuate if the airline remains cash-strapped and dependent on public subsidies.

• Jobs in the archipelago hang in the balance: roughly 1 400 positions rely on the airline’s turnaround.

• Legal fees versus hospital beds? – Any court battle will ultimately be financed from the same regional budget that funds healthcare and schools in the Azores.

A Privatization That Refuses to Take Off

The current tender, launched last year by the Azorean Treasury Office, attracted just one binding offer: the Atlantic Connect Group, a partnership between Newtour and MS Aviation. Late January, an independent jury chaired by economist Augusto Mateus advised the Government to reject that offer on the grounds that it “does not safeguard the financial interests of SATA Holding nor the Region.”According to the confidential assessment, the bid would force the public holding to inject fresh capital while offering no legal route to claw that money back. The panel also warned the terms might be framed by Brussels as illegal state aid, exposing the carrier to possible repayment orders.

What the Jury Saw as Turbulence

• Unlimited liability – The proposal allegedly obliges SATA Holding to take on all future capital needs without a ceiling.

• No upfront cash – Unlike typical aviation deals, the consortium would not inject direct funds on Day 1, leaving operational risk with the public shareholder.

• Unorthodox contract tweaks – Several clauses deviate from market practice and could complicate certification by the Portugal Competition Authority.

• State-aid red flags – Absence of a market-conform return may breach the EU’s “private investor test,” a prerequisite for any restructuring aid.

The Counter-Argument from Atlantic Connect Group

The consortium fired back in early February, branding the panel’s reading “arbitrary” and “legally unfounded.” It points out that the very same report cites “clear financial advantages,” including:

Zero capital calls in 2026, sparing the public purse in the short term.

Projected profitability by 2027, based on optimistic traffic forecasts between North America and the archipelago.

Atlantic Connect also says the jury unfairly downgraded its reputation score after Portuguese entrepreneurs joined the bid, calling the remark “defamatory.” Lawyers for the group hinted at litigation not only in Lisbon but potentially in EU courts and arbitration panels in London.

Political and European Dimensions

Regional President José Manuel Bolieiro insists the Government will wait for the final jury report before taking a stance, but stressed that “the law will be followed to the letter.”Meanwhile, Brussels has already granted one extension: the majority stake must be sold by 31 December 2026 as a condition for allowing the €453.24 M rescue authorised in 2022. Failure could trigger a reimbursement order similar to the one that forced Spanish carrier Spanair to close in 2012.Opposition party PS/Açores accuses the centre-right coalition of secrecy and urges publication of all tender documents.

What This Means for Residents

For most people living in Portugal, the drama is not merely procedural—it is about money, mobility and services:

• Tax exposure – Every extra month that Azores Airlines remains unrestructured increases the likelihood of new capital injections from the regional budget, indirectly financed by national taxpayers through the solidarity fund.

• Flight prices – A delayed sale limits the company’s ability to renew aircraft or expand profitable North Atlantic routes, pressuring it to keep inter-island fares high.

• Public services trade-off – Legal wrangling could divert regional funds away from infrastructure upgrades and healthcare in the nine islands.

• Investor sentiment – Another failed tender may chill private interest in other Portuguese regional assets, pushing up borrowing costs for sub-sovereign entities.

Next Steps and Timeline

Mid-March 2026 – Jury delivers final recommendation after hearing the consortium’s rebuttal.

April 2026 – Azorean cabinet either confirms rejection or orders negotiations; either path must be cleared by the Portugal Court of Auditors.

Summer 2026 – Possible court injunctions if Atlantic Connect files suit; EU monitoring continues.

31 December 2026 – Ultimate deadline set by the European Commission for a compliant sale; failure could trigger recovery of aid.

Airline unions and tourism boards are urging all sides to reach a swift, transparent accord, warning that prolonged uncertainty is “the worst of all worlds” for both workers and the archipelago’s fragile economy.