Portuguese Government Evaluating TAP Air Portugal Sale Despite Pressure From IAG

TAP Air Portugal is one of the few remaining airlines in Europe that have not been bought out by a larger group. The Lufthansa Group, Air France-KLM and the International Airlines Group are all eyeing the Portuguese national airline, however, with hopes that the carrier would help expand their respective South American networks. However, the Portuguese government is unhappy with the offers on the table, per a report by La Razón, picked up by ch-aviation.

Portugal wants to stay involved

One of the issues that the Portuguese government has with the offers currently on the table, is that it wants to be able to retain a 51% stake in its national airline. This would mean it maintains majority ownership, allowing it to stay involved in the overall operation and strategy.

It remains a valuable asset, though, not least because of its importance for Portuguese connectivity but equally because of its stronghold in the Brazilian market. This is of particular interest for the three large airline groups in Europe.

According to La Razón, International Airlines Group believes that Portugal’s intention to retain a stake makes any offer unattractive. The group has already attested to its market position, arguing that it would not be “buying to buy” but would instead evaluate any possible acquisition in line with its network strategy and added value. Lufthansa and Air France-KLM have not commented on Portugal’s latest statement, but it is not expected to have been well-received.

That being said, both groups have in recent times emerged satisfied with smaller stakes in partner airlines. For instance, Air France-KLM purchased a 20% stake in SAS, while Lufthansa is rumored to be eyeing a 10% stake in airBaltic. Lufthansa has reportedly been looking at a 19.9% stake in TAP to avoid the requirement of EU Commission approval.

Reuters reports that while the previous socialist government in Portugal wanted to maintain a stake in the carrier, the new government has not disclosed its plan. Instead, Portugal’s Prime Minister Luis Montenegro indicates that the question remains unanswered. According to Infrastructure Minister Miguel Pinto Luz, approximately 12 national and international parties have expressed interest in TAP.

IAG post-Air Europa

The group had hoped to acquire Air Europa, increasing its 20% stake to the full 100%. However, the deal fell through as European Commission push back discouraged IAG. It argued that the conditions were too hefty, making any such agreement unviable. In a statement to Simple Flying at the time, IAG -which already owns Madrid-based Iberia- had said:

“We are always open to look for opportunities in market. What is important is that those opportunities add value to the group. And right now the group is performing very well.

While not actively looking to purchase another airline, TAP Air Portugal is more apt choice than Air Europa for IAG, analysts have found. Because of IAG’s ownership of Iberia, Air Europa’s network would have had to be trimmed significantly due to eventual monopolies should a deal be reached. With TAP Air Portugal, this is less of an issue for the following reasons:

1. Different hubs: TAP Air Portugal is based in Lisbon, while Iberia is in Madrid. IAG hopes to create a dual hub system on the Iberian peninsula with any such new deal.
2. Different markets: While both Iberia and TAP focus on South America, they cater to different countries. Iberia mainly covers Spanish-speaking countries such as Argentina and Peru, while TAP’s lusophone dimension means its strength lies in the Brazilian market.

Recent consolidation

This follows recent moves from the larger groups to take over smaller airlines across Europe. A summary of those attempted or successful deals are listed below.