The German aviation holding company, Lufthansa Group, has purchased a 44.9% in Portugal’s flag carrier airline TAP Air Portugal. The deal was announced by Portuguese Prime Minister Luis Montenegro following a cabinet meeting Wednesday Oct. 14. Portugal’s Finance Minister Joaquim Miranda Sarmento has recently said that the government intends for TAP to be fully privatised at some point in 2028.
What has Been Agreed?
Prime Minister Montenegro told reporters on Wednesday that,
“The government is successfully bringing to a close the first phase of the privatisation of our national airline.”
The first phase of the Portuguese government’s wider privatisation plan involved selling a minority stake in TAP to a foreign investor.
As well as holding a 44.9% stake in TAP, Lufthansa will now be responsible for the executive and operational management of the airline.
The Portuguese government will maintain a controlling 50.1% stake in TAP during this stage of the privatisation process, with the remaining 5% being available for the airline’s employees to purchase.
It is understood that Lufthansa will have the option to buy any of the shares in TAP which are not purchased by the employees. With the government continuing to hold any equity which is not purchased either by the employees, or by Lufthansa.
Why Was Lufthansa Chosen?
Lufthansa’s bid of €1.201 billion for the minority stake was reportedly 16% higher than the bid from the Air France-KLM Group.
Montenegro also said that Lufthansa’s bid “carries a lower degree of uncertainty” than the alternate offer.
The Prime Minister said that the bidding process was,
“conducted with strict respect for competition, a stringent approach to negotiations and complete transparency vis-a-vis the Portuguese public”.
The Lufthansa Group currently consists of ten European airlines.
The group also holds a 41% stake in Italian flag carrier ITA Airways, and Turkish leisure airline SunExpress.
The Lufthansa Technik branch of the group, which provides maintenance and repair services, has also previously invested in the Santa Maria da Feira aircraft mechanic training facility in Northwestern Portugal.
The Future of TAP
The sale of a minority stake to Lufthansa is only the first stage of a the Portuguese government’s long-term privatisation plan for TAP.
The plan was first announced in September 2022, less than seven years after the airline was most recently nationalised in February 2016.
Finance Minister Joaquim Miranda Sarmento announced last week that the government intends for TAP to be fully privatised in “18 to 24 months’ time”.
This would require approval from the European Commission’s Directorate-General for Competition (DG COMP).
For Lufthansa to take a controlling stake in TAP, the group would need to demonstrate to DG COMP that purchasing the Portuguese flag carrier would not allow it to acquire monopoly power within the European aviation market.
Have you flown with TAP before? Would you be excited to see it join the Lufthansa Group? Let us know what you think in the comments.
