Air France-KLM and Lufthansa Hand In Their Last Offers for TAP Today, and the Government Gives Itself Fifteen Days to Pick
The two bidders for 44.9 percent of TAP deliver final offers to Parpública on 30 September, with a choice due in mid-October. Cabinet approval and EU competition clearance still follow, and the President has warned against selling for the money alone.
Air France-KLM and Lufthansa are due to hand in their final offers for a stake in TAP Air Portugal on Wednesday 30 September. Once they are in, the government has given itself about two weeks to choose a buyer.
"By the 30th the two companies will present their final proposals, and the government has 15 days to assess the decision," the Minister of Infrastructure and Housing, Miguel Pinto Luz, said on Monday at the Portuguese Tourism Summit organised by the Confederação do Turismo de Portugal (CTP, the Confederation of Portuguese Tourism) in Lisbon. That puts the choice in mid-October.
What is being sold
The state is selling up to 49.9 percent of the airline and keeping 50.1 percent. Of the stake on offer, 5 percent is reserved for TAP's workers. The two bidders are competing for the remaining 44.9 percent, and the winner has a right of first refusal on any part of the workers' tranche that goes unsold.
The offers go to Parpública, the company that manages the state's shareholdings. Both groups lodged binding bids on 29 July, the last day allowed. Parpública's report on them reached the government on 1 September, and the cabinet chose neither bidder, opening a final round of negotiation instead. The Minister of the Presidency, António Leitão Amaro, said then that the offers were "globally so close" that a further round was in the national interest, and that price "is naturally an important criterion, but not the only one".
The final offers set out the financial and strategic terms of each bid. The government will also weigh the planned investment, fleet development, maintenance, sustainable aviation fuel and the buyer's commitments to TAP's workforce.
What each bidder is promising
Air France-KLM, whose largest shareholders are the French state with 27.98 percent and the Dutch state with 9.13 percent, has pitched TAP as part of its "multi-hub" model. "Our objective is to strengthen operations in Lisbon, while developing connectivity in other cities in the country, including Porto," its chief executive, Benjamin Smith, said recently.
Lufthansa has promised to grow TAP in the Brazilian market, expand the Lisbon hub and build up Porto. It accepts a minority stake but wants influence over TAP's executive management. Its engineering arm, Lufthansa Technik, is building an aircraft component repair plant at the Lusopark business park in Santa Maria da Feira, which is expected to create more than 700 skilled jobs by 2027.
The steps after the choice
Picking a bidder does not close the deal. The Council of Ministers must then approve the contracts prepared by Parpública, including the share purchase agreement and the shareholders' agreement, and the sale needs clearance from the European competition authorities.
Pinto Luz would not say what powers the state will keep as majority owner, beyond saying that "several mechanisms will exist" to make sure the buyer meets its commitments.
The sale also carries a political edge. The Prime Minister, Luís Montenegro, has said he is confident the state will recover the full value it put into TAP. On Monday, closing the same tourism summit, President António José Seguro warned that TAP's future cannot be "treated only in terms of immediate needs and financial proceeds". As a candidate, Seguro argued that the state should keep a majority of the airline.
The final round comes after TAP lost 99.2 million euros in the first half of the year, as its fuel costs rose 18.7 percent.
