Lufthansa seen as frontrunner for TAP stake, announcement due 14 October

Where the sale stands

Portugal's government is expected to announce the winner of the TAP privatisation at an extraordinary Council of Ministers meeting on Wednesday, 14 October. SIC reported that Lufthansa is in the stronger position against Air France-KLM, and Diário de Notícias said it had confirmed this with sources familiar with the process. The decision is not yet formally closed and is only to be completed at that meeting. The sale covers up to 49.9% of the capital, with 5% reserved for employees, while both groups have bid for 44.9%.

Why Lufthansa is ahead

According to SIC, the German group's proposal is the more financially advantageous one for the state, because it offers to pay for its entry entirely in cash. Handelsblatt, citing a media report, said the Air France-KLM offer mixes cash with shares, which made it less attractive. Sources cited by SIC also point to Lufthansa's greater financial capacity and larger scale, which gives it more room to invest. Its wish to see the new Lisbon airport built as early as possible, along with an expansion of Portela, fits the government's plans for airport capacity in the capital. The infrastructure ministry declined to comment, and minister Miguel Pinto Luz did not comment when SIC contacted him.

The rival bids

Both groups submitted improved binding offers on 30 September, and the evaluation looked beyond price. It also weighed the industrial plan, fleet development, routes, investment and labour commitments. Lufthansa has argued for growth in the Brazilian market, an expanded Lisbon hub and a stronger operation in Porto. Air France-KLM has proposed stronger connectivity from Lisbon and development of operations in other Portuguese cities. SAPO reported that both proposals exceed one billion euros, and that Air France-KLM chief executive Benjamin Smith said in Brussels in early October that he expected an answer from the Portuguese state that week. Lufthansa chief executive Carsten Spohr avoided discussing the content of his group's offer and stressed only the strong competition between the two.

What follows the announcement

The announcement will not be the final step, because the European Commission must still review the decision. Finance minister Joaquim Miranda Sarmento said that review could take between 18 and 24 months. He added that the financial effects of the deal would only show from 2028, once the European regulatory process is complete. TAP is treated as a strategic asset for Portugal, particularly for its links to Brazil, Africa and North America. If the government confirms Lufthansa, TAP would join a group that already includes seven other airlines, according to SIC. Lufthansa, founded in Berlin on 6 January 1926, operates close to 300 aircraft on about 900 routes to more than 200 destinations and carries nearly 140 million passengers a year.