Lufthansa Group has outbid Air France-KLM to win the battle for a minority share in TAP Air Portugal, paying €1.2 billion for a 44.9% stake. The Portuguese government will retain 50.1% ownership in the carrier. Both proposals also included a provision for a future majority share position and full privatization by 2028. This will add a sixth national carrier to the Lufthansa Group. Lufthansa Group has operations in Germany, Switzerland, Austria, Belgium, Italy and now Portugal.
The Lufthansa bid was all cash, versus a cash plus shares bid from Air France-KLM. The all cash bid was a factor in the final decision, preferred by the Portuguese government. “This is a strategic decision, which, as was our wish, was not confined to price. We are in a position to guarantee that we have safeguarded the interests of TAP and the Portuguese people,” said the Minister of Infrastructure and Housing, Miguel Pinto Luz.
The Lufthansa Group Deal
Carlos Oliveira, Chairman of TAP’s Board of Directors, said: “TAP has reached this point after a challenging journey, marked by profound transformations and by the effort and dedication of its staff, to whom I would like to extend a special word of recognition.
This decision opens up new prospects for the Company’s future. More than simply the arrival of a new shareholder, it is important to ensure that this partnership translates into concrete opportunities for growth, a stronger and more competitive TAP, and the creation of value for Portugal.”
Operational Plans for TAP and Why this is Important
The bids of both carriers naturally focused on protecting and growing the Lisbon hub. Both also stressed the importance of South Atlantic and island operations and the opportunities for growth in Europe-Latin American operations. Growing Porto as a regional destination, increasing the size of TAP’s fleet to potentially 130 aircraft, and improving MRO operations were other key factors in the decision.
The development of Porto as a second regional hub, connecting with other Lufthansa Group hub operations can grow inter-European traffic,. Hubs in Frankfurt, Munich, Zurich, Geneva, Brussels, Rome, Milan and Vienna can help quickly enhance a second hub in Portugal.
Connectivity for operations to Brazil and other Latin American destinations will provide Lufthansa Group to fill out its global network. TAP’s route network fills a gap in the group’s route system. Another key factor is the trans-Atlantic joint venture with Lufthansa, United and Air Canada, which TAP could quickly join to provide additional destinations and connectivity on both sides of the ocean.
The Bottom Line
“The final decision, between Air France/KLM and Lufthansa, fell on the financially stronger proposal presented by Lufthansa, which also presented an ambitious growth plan for TAP and the possibility of new investments in Portugal,” the government added. “The government considers that this operation safeguards national strategic interests, being convinced that Lufthansa has the scale, resources and ambition necessary for the sustainable growth of TAP.”
Lufthansa Group includes Lufthansa, Swiss, Brussels Airways, Austrian, and ITA Airways (Italy). TAP will become their second southern European airline along with ITA. As a member of the Star Alliance, with existing partnerships with all of the Lufthansa Group carriers that are already Star Alliance members, service integration will be easier Implementation and integration efforts are currently being planned, and will likely begin to take effect by mid-2027 as the carriers optimize their schedules and connectivity.
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