Portugal Picks Lufthansa Over Air France-KLM for TAP Stake

Portugal selected Deutsche Lufthansa AG to buy a minority stake in troubled airline TAP SA, giving the government a lifeline to ensure the state-owned carrier’s survival while opening up new routes for the German group. The decision was taken at a cabinet meeting Wednesday and follows a stronger financial offer from Lufthansa than rival bidder Air France-KLM. Lufthansa’s proposal is 16% higher and values TAP at €2.55 billion ($2.8 billion), Prime Minister Luis Montenegro said in Lisbon. [caption id="attachment_57299386" align="alignnone" width="814"] Passenger aircraft, operated by TAP SA, on the tarmac at Humberto Delgado airport in Lisbon.Photographer: Zed Jameson/Bloomberg[/caption] Lufthansa will acquire 44.9% of TAP initially, with its stake potentially rising to 49.9% if employees don’t exercise their right to buy the 5% reserved for them. Its offer would generate €1.201 billion in proceeds if the full 49.9% is sold, compared with €1.038 billion under Air France-KLM’s proposal, Montenegro said. “We are guaranteeing TAP’s growth — growth in its fleet, passengers, destinations and connections, as well as investment not only in TAP but across Portugal’s aviation sector,” Montenegro said. A representative of Lufthansa wasn’t immediately available to comment. Air France-KLM said it was disappointed in the decision but appreciated the “constructive dialogue” during the process. The Portuguese airline is an attractive target because of its extensive network linking Europe with Latin America and Africa. Officials have argued that the carrier, which received billions of euros in state aid during the pandemic, needs to join a larger group to gain scale and secure its long-term future. It posted a €99 million first-half loss as higher fuel costs weighed on earnings. Lufthansa, which will take over TAP’s executive and operational management, has said the Portuguese carrier would fit its multi-airline, multi-hub model and strengthen the group’s position on routes linking Europe with Brazil, Latin America and Africa. The German carrier pledged to keep Lisbon as a hub. Lufthansa also said it’s open to buying the state’s remaining 50.1% stake in TAP down the line. That proposal would include €863 million in additional cash and a share swap worth about €488 million, giving Portugal roughly 5% of the combined Lufthansa-TAP group and making it the second-largest shareholder. The deal adds TAP to a portfolio that includes Lufthansa, Swiss, Austrian Airlines, Brussels Airlines and ITA Airways. The group has pointed to its experience managing network carriers across Europe as a reason it could help TAP expand and improve its competitiveness. Lufthansa and TAP are already members of Star Alliance and have an existing commercial relationship. The German airline has said TAP would complement its network, particularly in the South Atlantic, where the Portuguese airline has a strong position. Bloomberg News reported earlier that Lufthansa had been picked to buy the stake.

Portugal Picks Lufthansa Over Air France-KLM for TAP Stake

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