Privatization of TAP: it will be in 2024. But with whom?

Consolidation in the European airline sector continues with the announced privatization of TAP, which is due to take effect in 2024. With Lufthansa Group, Air France-KLM and IAG all vying for the win.

It has long been known that the Portuguese government intended to privatize TAP, but now the agenda is becoming clearer. According to the Finance Minister, “The privatization process will take a few months and will not be completed before 2023“. This remains vague, but it proves that the beginning is near and that the process is inevitable, that it will begin in the coming months and conclude next year.

Privatization of TAP: the challenges facing the Portuguese government

The Portuguese government therefore intends to privatize an airline that it has no intention of bailing out forever after a somewhat tumultuous history, but not as much as that of Alitalia.

The airline was founded in 1945, privatized in 1953, renationalized in 1975 following the 1974 revolution, and listed on the stock exchange in 1989. In 2000, the SAIRgroup (Swissair) took a 34% stake. After the demise of SAIRGroup, the company desperately sought other partners, and after a number of setbacks, in 2015 it was acquired by David Neeleman, already owner of Morris Air, JetBlue Airways and Azul Brazilian Airlines. This new privatization was blocked by the courts, but the government went ahead. However, unhappy with the airline’s management and in the midst of the COVID crisis, the government renationalized it in 2020, while waiting to find a more reliable partner.

Unsurprisingly, the airline is back on the market in 2023, once the crisis is over and its results improve.

Not a flourishing situation, however. At a time when most airlines are announcing record results, TAP is merely limiting its losses, with first-quarter 2023 losses of 58 million euros, half what they were a year earlier. The reason? Certainly its management, but also its size, which is a limiting factor during periods of strong growth. Which simply argues in favor of finding a partner of sufficient size.

But TAP is not the only concern for the Portuguese government, which fears that a potential buyer would suck some of the traffic from the airline’s Lisbon hub to feed its own hubs, with obvious consequences for the economy and employment.

For the government, the challenge is twofold: to give the airline a future without jeopardizing the airport’s future.

What does TAP have to offer its buyer?

Of course, the airline provides aircraft, customers and, above all, a network! This network mainly concerns the United States, but also South America and Africa, thanks to its history and the ideal positioning of its Lisbon hub to serve these destinations.

But then there’s its hub, in two ways. Firstly, because of its location in relation to certain destinations, and secondly, simply because for some airlines whose hub is reaching its capacity limits, finding a new hub is a vital growth driver.

However, there’s a downside: Lisbon is also a saturated airport, but it’s also highly inefficient. A project to extend the existing airport and build a new one had emerged, which would have been a real windfall for a potential buyer, but was buried by the government in 2022.

Given the traffic in Lisbon, we can only assume that the subject will come up again sooner or later, and that potential buyers will have this in mind, making a bet on the future.

Who’s interested in TAP?

Unsurprisingly, the three European leaders Air France-KLM, IAG and Lufthansa Group will be battling it out. Other rumours are circulating, but we give them little credence.

The first would be a takeover by a low-cost airline. Unlikely, the government wants to maintain TAP’s status and, above all, keep it in a global alliance to ensure its success.

The second would be a marriage with other ailing airlines such as SAS and Finnair. Again, unlikely. The possibility of a major acquiring one or two of these airlines is a possibility, one day, but for two to marry would be tantamount to believing that you could create an able-bodied person by marrying two one-legged people. That would just postpone the problem. And for economic, cultural and sphere-of-influence reasons, if something were to happen in the northern countries, we can’t see Lufthansa not getting involved in this territory, which is to some extent its preserve, especially as SAS is also a member of Star Alliance.

So back to our usual suspects.

Air France-KLM

TAP will be a critical issue for the Franco-Dutch group, which has seen ITA slip from its grasp to the benefit of Lufthansa. It needs to grow in size, as it weighs little against IAG (British Airways, Iberia, Aer Lingus, Level, Vueling and soon Air Europa) and the Lufthansa Group (Lufthansa, Swiss, Austrian, Brussels Airlines, ITA, Eurowings) and has critical need for a new hub given what’s happening in Amsterdam.

Freed from the constraints associated with the COVID subsidies it has repaid, it now has its hands free and is in a very interesting post COVID dynamic, with Ben Smith’s work bearing fruit.

Its weakness? TAP is a member of Star Alliance, and has been a Lufthansa partner for 20 years. We know the weight of alliances and heritage in this kind of deal, and the recent case of ITA is just the exception that proves the rule: if Air France-KLM had been able to invest directly instead of simply acting as a commercial partner, it would certainly have won the bid.

Lufthansa Group

The German group has demonstrated its ability to turn around and restructure airlines and, above all, to integrate them successfully and develop synergies between the group’s airlines. It is also a long-standing TAP partner in Star Alliance.

It may have less need of the Lisbon hub than Air France-KLM, which could work in Air France-KLM’s favor, but in the case of ITA it has nevertheless insisted on its desire to develop the Rome hub.

But then there’s ITA. Would Lufthansa be able to manage the integration of two airlines that are not in great shape, with cultures different from those of its previous acquisitions? It’s a question that can be raised. Particularly the cultural dimension

Then there’s the financial question. Lufthansa did not take on debt to buy ITA so it still has some room to maneuver on this front, but when we see how the staff unions were worried about the possibility of buying out a lame duck that would penalize the group’s performance, we can imagine that the same question will arise for TAP.

But would shite prefer to pass if the terms of the buyout become complicated, preferring to save hits money for a future opportunity on LOT or SAS? Possible.

Finally, there’s the question of competition, with many worried about LH Group becoming hegemonic. We hardly believe it. As long as there are other airlines to travel to, from or within Portugal, there will be no problem. There will still be IAG, Air France-KLM and a host of low-cost carriers, so no worries there.


Although it said it was looking into the matter, IAG’s desire to get its hands on TAP seems less obvious than that of its competitors. But it’s clear that she’ll be keeping an eye on the dossier, if only to ensure that her rivals don’t succeed effortlessly.

Buying out TAP would lock in the Iberian peninsula, but does it need to? With numerous routes between Spain, where it operates Iberia, Vueling and Air Europa, and Portugal, TAP is less vital to the Anglo-Spanish group in terms of its local footprint.

And IAG is OneWorld, and we really believe in the importance of alliances in this merger.

As for competition issues, the same reasoning applies as for the Lufthansa Group.

How important are the alliances in the TAP takeover?

Finally, the privatization of TAP cannot be overlooked in terms of alliances, since an airline’s strategy may be conditioned by the stakes of the alliance it represents. Whether or not one member buys one airline has a potential commercial impact on all the others.

In the event of TAP’s takeover by Air France-KLM (Skyteam)

If Air France-KLM has been outpaced in the race for size by its competitors, the same can be said of Skyteam’s presence in Europe, which is weak, especially in the major countries. And with the scheduled departure of ITA and Air Europa, things aren’t going to get any better.

A takeover of TAP by Air France-KLM would help stem the bleeding. No less, but certainly not more. Skyteam would remain a dwarf in Europe.

On the other hand, this would contribute to a certain balance around the Mediterranean, a strategic zone for leisure customers. Spain for OneWorld, Italy for Star Alliance, Portugal for Skyteam. Although Star Alliance also has Greece (Aegean)….

Conversely, not acquiring TAP would wipe out the alliance in this region, and virtually all of Europe outside France and the Netherlands.

In the event of a takeover of TAP by the Lufthansa Group (Star Alliance)

Star Alliance would thus consolidate its dominance in Europe and gain an attractive presence in leisure markets with Portugal, Italy and Greece.

This would be a real blow for its two competitors, but above all for Skyteam.

Conversely, not buying it would be a loss, but not a tragedy.

In the event of a takeover of TAP by IAG (OneWorld)

OneWorld would have a stranglehold on the Iberian Peninsula, but this would do little to improve its global European presence.

It would steal a member from Star Alliance, but, once again, it would mainly close off opportunities for Skyteam.

Our prediction

It’s always difficult to make predictions on such matters, because beyond industrial logic, there are political logics that also come into play. However, if we had to make a prediction, we think it will be a very tight contest between Air France-KLM and Lufthansa.

But in our opinion the subject is more vital for the Franco-Dutch group than for the German one and it will be ready to go much further to win the bid, while LH Group will do nothing unreasonable, aware of its large lead in Europe and preferring to save its resources for future acquisitions.

But if industrial choices, the weight of alliances and politics decide otherwise…

Bottom line

The process of privatizing TAP will begin in the coming months and will be completed in 2024. Air France-KLM and Lufthansa have their trump cards to play, but the issue is far more vital for the first. Unless IAG hides its cards and creates a surprise.

What about you? How do you feel about this privatization? Tell us in the comments.

Photo : A330Neo Air Portugal by Matheus Obst via Shuttertock

Bertrand Duperrin
Bertrand Duperrin
Compulsive traveler, present in the French #avgeek community since the late 2000s and passionate about (long) travel since his youth, Bertrand Duperrin co-founded Travel Guys with Olivier Delestre in March 2015.

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