Following a serious government crisis and the new elections in May, the new Portuguese minority government under Prime Minister Luis Montenegro plans to resume the privatization of the national airline, TAP Air Portugal. Recently, the government leaned toward a partial sale of the airline to a strategic partner. The resumption of the process is considered timely, after the center-right AD party coalition emerged victorious from the elections, albeit without an absolute majority.
The privatization process of TAP came to a standstill in the spring of this year due to the government crisis at the time. According to media reports, the Portuguese government has now received two independent valuation reports on TAP from Banco Finantia and the auditor EY. These reports form the basis for negotiations with potential buyers. The circle of interested parties is broad and includes major European aviation groups such as International Airlines Group (IAG), Air France-KLM and the Lufthansa Group, all of which have expressed a strategic interest in TAP.
Given the new government's lack of its own parliamentary majority, a compromise on privatization will be necessary. According to information from Bloomberg, Portugal recently leaned toward selling 49 percent of TAP's shares to private investors. A key point on which the government and opposition agree is the importance of Lisbon's future hub traffic. A new owner must ensure that Lisbon continues to play a central role as a hub. This underscores the airport's strategic importance for Portugal's economic development and its connection to important long-haul markets.
Lufthansa's interest in TAP Air Portugal is nothing new. As early as February 2020, there were reports of a possible Lufthansa entry into TAP, possibly in conjunction with its US partner United Airlines. Shortly thereafter, however, the entire aviation industry entered crisis mode due to the pandemic, temporarily thwarting all plans. The underlying arguments for a Lufthansa deal with TAP have barely changed even five years later. In particular, the erosion of Star Alliance's market share in South America since its former partner TAM switched to LAN makes TAP, with its strong South American network, highly attractive for Lufthansa as a Star Alliance member.