TAP Air Portugal Finally Launches Privatization Process

TAP Air Portugal has finally relaunched the privatization process, announcing yesterday it would sell a controlling stake in the airline.

Finally official

Financial problems have riddled TAP Air Portugal in recent years, influenced by, but not limited to the COVID-19 pandemic. The government has sold and repurchased stakes in the airline but now seeks to sell a controlling stake. While the privatization has been public knowledge for some time and has drawn interest from airlines and airline groups, it was finally approved yesterday by the cabinet.

“The content of the decree contemplates objectives for TAP growth, national hub growth, growth and employment within the aviation sector, better utilisation of national airports and pricing.” – Fernando Medina, Minister of Finance, Portugal

The plan is to sell a controlling stake of 51% or greater and keep a strategic stake to guard the national interest at Humberto Delgado Airport (LIS). TAP has already drawn the interest of the Lufthansa Group, Air France-KLM Group, the International Airlines Group (IAG), and even the Brazilian government.

Photo: Lukas Souza | Simple Flying

Earlier this week, IAG’s CEO, Luis Gallego, stated the group is still interested in a stake in TAP, highlighting the carrier’s network to Brazil and Africa as a significant point of interest.

“We are always open to have great companies, brands in our portfolio. We want to see the conditions of TAP privatisation, we think it could be interesting for us.”

In February, Air France-KLM stated it remained interested in TAP, also citing the airline’s Brazilian network as a point of attraction. In March, Lufthansa Group CEO Carsten Spohr said the airline group’s primary interest was ITA Airways but was also considering acquiring a stake in TAP. Strictly looking at airline alliances, it would make the most sense for TAP to be integrated into the Lufthansa Group because of Star Alliance. However, only time will tell what will happen with the Portuguese Airline.

A look at TAP’s Brazilian network

According to data from Cirium, 2,203 flights are scheduled between Europe and Brazil in October. TAP has the largest market share, with 685 flights, or 31.1%. The second-largest share belongs to LATAM Brasil, with 410 flights. Air France has the third-largest share, serving three Brazilian destinations: São Paulo, Rio de Janeiro, and Fortaleza.

TAP serves ten Brazilian destinations from Porto and Lisbon: Belém, Fortaleza, Natal, Salvador, Brasilia, Rio de Janeiro, São Paulo, Porto Alegre, Belo Horizonte, and Recife. The busiest route is from Lisbon to São Paulo, with three flights most days. Rio de Janeiro is also a busy route but has one flight on most days and occasionally a second.

Photo: Matheus Obst I Shutterstock

Using October’s flights, below is what each airline group’s route network would look like to Brazil if they acquired TAP:

• If acquired by the Lufthansa Group: 685 (TAP) + 99 (ITA) + 88 (Lufthansa) + 62 (SWISS) = 934 flights
• If acquired by the Air France-KLM Group: 685 (TAP) + 212 (Air France) + 124 (KLM) = 1,021 flights
• If acquired by IAG: 685 (TAP) + 107 (British Airways) + 92 (Iberia) = 884 flights

Using October’s routes, below is the number of routes each group would serve if they acquired TAP:

• If acquired by the Lufthansa Group: 12 (TAP) + 3 (Lufthansa) + 2 (ITA) + 1 (SWISS) = 18 routes
• If acquired by the Air France-KLM Group: 12 (TAP) + 3 (Air France) + 1 (KLM) = 16 routes
• If acquired by IAG: 12 (TAP) + 2 (British Airways) + 2 (Iberia) = 14 routes

Source: Reuters

Who do you think will acquire the majority stake in TAP? Why? Let us know in the comments below.