Portugal picks Lufthansa over Air France-KLM for TAP stake

The final decision came down to Lufthansa’s ‘financially stronger proposal’ government says.

Lufthansa Group has won the bidding for a minority stake in TAP Air Portugal, beating out Air France-KLM.

Portugal’s Council of Ministers approved the selection on 14 October, the government says. The total price, including the 5% reserved for employees, is €1.2 billion ($1.33 billion) for 49.9% of the company.

In comparing the competing bids, the government says it chose the proposal with the higher financial offer and less uncertainty, up to 16% above Air France-KLM’s. Infrastructure minister Miguel Pinto Luz calls it a “strategic decision” that was “not confined to price”.

The deal also includes a proposal for the acquisition of a majority stake in TAP, under a possible second phase divestment. It says the proposal submitted by Lufthansa for the majority of the capital foresees an additional cash flow of €1.35 billion, resulting in a total direct valuation of TAP of €2.55 billion.

TAP is already a partner in Star Alliance with Lufthansa Group and its carriers.

Speaking ahead of the announcement at the World Aviation Festival in Lisbon on 14 October, TAP chief executive Luis Rodrigues said he was confident in the sale process and long-term plan for the airline.

“Sometime in the near future, interaction with the new shareholder will begin, deeper than what we have had so far. But so far, the four parties – including the Portuguese government – were quite happy with what we have, which is long-haul South America, long-haul North America, a hub located in Lisbon, maintenance and engineering and dealing with the infrastructure constraints we have in this country.”

Under the 10-year plan, the carrier “looks like a significantly larger company than it is today,” he says, with the airline continuing to leverage the position of its Lisbon and Porto hubs. Long-haul operations will continue to be to the west, while TAP will become “a more profitable company inside the group we are going to be in”.

Under a deal – one of the final privatisation efforts across Europe’s national airlines – 5% of shares will be reserved for employees, with the state retaining 50.1% control.

One of the key long-term challenges TAP faces are the growth constraints imposed by its Lisbon base.

“This airport was designed for 10-12 million people. Last year it had 37 million. The city grew up around the airport so there is no expansion room,” Rodrigues says.

“[Lisbon airport operator] Vinci is doing its best, but there is a limit to what it can do,” he adds.

The Portuguese government in May 2024 selected the military airfield of Alcochete as the site for the city’s new airport, with a planned opening around 2037.

“We just need to survive the next 10 years while Vinci tries to do the best with the [existing] infrastructure,” says Rodrigues.

Graham Dunn contributed reporting from Lisbon.

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