The bride, TAP, is in a comfortable position: three attractive suitors are courting her. They are Air France-KLM, Lufthansa, and IAG. Following the takeover of SAS by Air France-KLM, the purchase of Italy’s ITA by Lufthansa, and the announced entry of Turkish Airlines into the private Spanish airline, Air Europa, Portugal’s TAP is the last major legally independent European airline alongside LOT from Poland, and Finland’s Finnair. In the case of TAP, this is likely to change in the current year.
Interested parties are knocking on TAP’s door and, in two cases, have already announced their intention to submit non-binding bids to Parpública, the Portuguese public investment company (more here).
These are AirFrance-KLM and Lufthansa, which have expressed a stark interest in the Lisbon-headquartered airline as done by the IAG Group before.
The Portuguese state can expect €700 million from the transaction
Based on the number of aircraft, its route network and other assets, analysts value TAP’s strategic stake for privatization at around €1.5 billion. However, only 44.9% will be sold to an investor, while Parpública announced that it would block 5% of the shares for the airline’s employees. This means that owner, Parpública, will receive around €700 million for the partial sale of the airline, assuming that the interested parties do not drive the price up to astronomical heights for competitive reasons. In any case, the Portuguese state will remain the majority shareholder in the country’s flag carrier (50.1%).
Who is in a stronger position?
In terms of prospects of success, Lufthansa has the advantage that TAP is a member of the Star Alliance. Another plus point is that the airline’s Hamburg-based technical subsidiary, Lufthansa Technik, recently announced plans to build a new repair, overhaul, and maintenance center in Santa Maria da Feira near Porto, with a focus on engine maintenance. The number of employees there is expected to more than double from currently 450 to 1,000 by 2030. If Lufthansa is awarded the contract, the German airline announced that it would develop Lisbon’s Humberto Delgado Airport into a passenger and cargo gateway for air traffic to/from South America and parts of Africa.
Its competitor, Air France-KLM is likely to make the most attractive financial offer. IAG, on the other hand, is considered to have little chance of success, as it already owns the Spanish airlines, Iberia and Vueling, making it the dominant carrier on the Iberian Peninsula. This is likely to be an important criterion for EU competition watchdogs in their upcoming decision on the fate of TAP.
TAP earns money again
The carrier is back in the black, it is strategically important for passenger and cargo flows between southwestern Europe and Brazil. It currently operates passenger services to 13 destinations in Brazil [TAP does not have any cargo aircraft], with Sao Paulo, Rio de Janeiro, Belo Horizonte, and Brasilia included in its route map.
The free trade agreement between the EU and Mercosur countries, which was announced some time ago and approved by the EU Commission on 09JAN26, is also likely to have contributed to the increased interest of Air France-KLM and Lufthansa in TAP. The Mercosur block includes Brazil, Argentina, Paraguay, and Uruguay. Together, the new transatlantic free trade zone comprises 700 million inhabitants, making it globally the largest of its kind. Once the agreement comes into force, there will also be an increase in ocean and air freight transport between the participating markets, spurring automotive, pharma and chemical products from east to west, and agrarian produce from Latin America to Europe. Passenger traffic will also grow on routes across the South Atlantic
Three key requirements
Back to Parpública which celebrated its 25th year of existence in SEP25: These are the three most important criteria for the partial privatization of TAP, echoed by the state holding:
- Enhancing TAP’s role as a key provider of highly skilled jobs in aviation, engineering, and maintenance
- Sustaining essential domestic and international routes (e.g., Portuguese-speaking destinations), which include links to key African countries (Angola, Mozambique, etc.)
- Preserving TAP’s well-established identity as Portugal’s flag carrier, with the development of a sound industrial plan and strategic routes.
After reviewing the non-binding bids, Parpública will ask the applicants to submit a comprehensive purchase proposal. The decisive factor here is not only the price they are willing to pay, but also the overall package they present for securing the future of TAP.
It is expected that the negotiations will take months, with analysts awaiting an announcement on the future of TAP by next summer.
