Lufthansa outpaced Air France-KLM in the fight for Portuguese airline
The Portuguese government has selected Germany's Lufthansa Group as the investor for the privatization of the national airline TAP Air Portugal. The German carrier offered €1.025 billion for 44.9% of the company's shares, outpacing the competing proposal from the Franco-Dutch group Air France-KLM.
The decision, made on October 14 at a meeting of Portugal's Council of Ministers, was announced by the Portuguese government and Lufthansa Group.
The total value of the deal could increase to €1.2 billion, and Lufthansa's stake to 49.9%. This will depend on the implementation of a share package reserved for TAP employees, as well as additional conditions for calculating the final price.
Under the privatization terms, 5% of the airline's shares will initially be offered to its employees. If they do not exercise the purchase right, Lufthansa will be able to buy the corresponding stake. The Portuguese state will at this stage retain a controlling stake of 50.1%.
Portugal's Prime Minister Luís Montenegro said Lufthansa's offer turned out to be 16% higher than Air France-KLM's bid. The government also took into account the financial reliability of participants, their investment plans, and the conditions for future management of the airline.
Lufthansa sees the acquisition of a stake in TAP as an opportunity to strengthen its presence in the transatlantic market. The Portuguese airline has an extensive route network between Europe and Latin American countries, primarily Brazil.
Lufthansa Group CEO Carsten Spohr noted that TAP is a profitable airline and a long-standing partner of the group in the Star Alliance. According to him, the acquisition will allow Lufthansa to expand its international business while preserving the Portuguese identity of the carrier.
According to the investment plans, Lufthansa is to support the development of TAP's main aviation hub in Lisbon, the expansion of routes from Porto, and the modernization of the aircraft fleet.
The Portuguese government expects that in the long term the number of TAP aircraft could grow to 130. The proposal also provides for additional investments in aviation maintenance and engineering capabilities within the country.
In particular, Lufthansa is already building an aircraft maintenance center near Porto. The project in Santa Maria da Feira involves investments of approximately €300 million and the creation of about 700 jobs.
At the same time, the acquisition of TAP shares has not yet been completed. Lufthansa and the Portuguese state holding company Parpública must finally agree and sign the deal documents. To close the deal, approvals from relevant regulatory authorities, particularly in the area of competition, are also required.
The Portuguese government has already announced its intention to begin preparations for the next stage of privatization, which may involve selling a majority of TAP shares. The completion of this process is considered in the perspective of 2028.
According to the Portuguese government's assessment, the financial terms proposed by Lufthansa imply a total company valuation of approximately €2.55 billion, provided the second stage of privatization is implemented. This would allow the state to recover a significant portion of the funds invested in supporting TAP over previous years.
For Lufthansa, the acquisition will be another step in expanding its European aviation business. The group already includes Lufthansa Airlines, SWISS, Austrian Airlines, Brussels Airlines, and Italy's ITA Airways.
Sources: Lufthansa Group, Government of Portugal