Portugal puts national airline TAP up for sale

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Portugal’s national carrier TAP has been put up for sale by the government in a move that opens the way for more airline consolidation and a potential bidding war involving British Airways owner IAG and Air France-KLM.

Fernando Medina, Portugal’s finance minister, said on Thursday that the cabinet had approved the privatisation of the airline — which is wholly owned by the government — and that at least 51 per cent of its shares would be sold.

TAP, which is estimated to be worth around €1bn and swung back into profit last year, is emerging from years of trouble that have included near bankruptcy, a government bailout and scandals.

Its sale would represent a new stage of consolidation in Europe’s airline industry, which has been accelerated by the pandemic. 

The region’s three major airline groups, IAG, Air France-KLM and Lufthansa, have each said they are looking for acquisitions and expressed interest in TAP, which would open up the increasingly lucrative South American market.

“We see the takeover of TAP as being part of the ongoing consolidation that [is] playing out in Europe with the end game likely being three large network carriers and Ryanair,” said Mark Simpson, aviation analyst at Goodbody.

Luis Gallego, IAG’s chief executive, said in Lisbon on Wednesday: “We’ll have to study the process [of privatisation] and carefully consider the details, but we feel optimistic and believe that TAP can become another success story within IAG.”

IAG earlier this year agreed a deal to buy Spain’s Air Europa, while Lufthansa bought Italy’s ITA, the successor to the defunct Alitalia.

On TAP, Medina said: “There are interested airlines and their interest is public, which we welcome as a positive sign for the success of this operation.”

He also noted TAP’s “privileged connections” to the Portuguese-speaking countries Brazil, Angola and Mozambique.

TAP ended a protracted run of losses and returned to the black in 2022 with a profit of €66mn.

The Portuguese government left open the option of selling 100 per cent of its TAP shares, but also said up to 5 per cent would be reserved for employees of the company.

It said it was looking for “an investor of scale” from the airline sector that would ensure the company’s growth, the development of Lisbon as a hub, and make the most of underutilised airports, notably Porto. Medina said: “We are not going to privatise TAP simply with the highest bidder.”

TAP was last privatised in 2015 but the collapse of air travel during the pandemic brought it to the brink of failure. The government chose to save it in June 2020 via a nationalisation plan approved by the European Commission. The rescue aid totalled €3.2bn of loans and loan guarantees and led to a forced restructuring.

More recently, TAP has been at the centre of controversy that led to the departure of former chief executive Christine Ourmières-Widener and infrastructure minister Pedro Nuno Santos among others.

Ourmières-Widener, a former Air France executive, was fired by the government in March in the wake of a scandal over an irregular severance payment to a former board member. She has called the sacking “illegal”, said she had “always acted with total transparency” and this month filed a lawsuit for compensation.

Along with the main TAP airline, the sale will include Portugália, a small business that does short-haul flights, as well as a catering company and a health services company.