Portugal Picks Lufthansa to Buy Up to 49.9 Percent of TAP for 1,201 Million Euros, Keeping Five of Nine Board Seats for the State

The Portuguese government has chosen Lufthansa to buy a stake in TAP Air Portugal. After an extraordinary meeting of the Conselho de Ministros (Council of Ministers) on Wednesday, 14 October, Prime Minister Luís Montenegro announced that the German group had beaten Air France-KLM, the other final bidder, with an offer worth 1,201 million euros for up to 49.9 percent of the airline. The State keeps the remaining 50.1 percent and, with it, a majority on the board.

"Avaliadas as propostas, a decisão do Governo recai sobre o grupo Lufthansa, cuja proposta financeira é 16% superior à proposta concorrente e com menor grau de incerteza" (having assessed the offers, the government's decision falls on the Lufthansa group, whose financial offer is 16 percent higher than the rival one and carries less uncertainty), Montenegro said, as reported by RTP.

What Lufthansa pays

Of the 49.9 percent on sale, 44.9 percent goes to the winning bidder and up to 5 percent is reserved for TAP's workers. According to the government's presentation, as reported by ECO, the 1,201 million euros is made up of 1,025 million for the shares, 118 million for the workers' 5 percent (offered to staff at the same price, with Lufthansa buying whatever they do not take up), and 58 million for TAP's catering company, Cateringpor, and for its holding in the ground handling company SPdH.

Air France-KLM's financial offer came to 1,038 million euros, about 14 percent less, ECO reports. A further 100 million euros depended on TAP hitting profit and debt targets by 2028, an uncertainty that weighed against it.

Who runs the airline

The State will appoint five of the nine members of TAP's board, including the chair. Lufthansa will name three executive directors who take over day-to-day operational management. Strategy, the fleet and large financial operations must be decided by consensus, so neither shareholder can impose its will on them. Changes to the hub, the brand or the head office need the shareholders' approval, ECO reports from the government's document.

"Claro que o controlo da empresa se mantém no Estado português" (of course, control of the company stays with the Portuguese State), said the Infrastructure Minister, Miguel Pinto Luz.

The State also takes on some costs. It will buy TAP's property within two years of the new Lisbon airport opening, net of environmental liabilities, and it keeps the litigation from the insolvency of the old TAP holding, including Azul's claim of about 189 million euros.

Planes, Porto and a school at Tancos

Lufthansa has promised to grow TAP's fleet from 101 aircraft to 117 in 2035 and to 130 once the new Lisbon airport opens. Porto stays a second base with eight long-haul aircraft, TAP stays in the Star Alliance, and its maintenance arm joins Lufthansa Technik. The group also plans a civil and military flying school at the Tancos air base, which ECO puts at 500 million euros and 200 jobs, with the State contributing about 50 million, mainly for the runway.

For passengers, nothing changes yet. The sale still faces a final round of negotiation and regulatory approval, including the European Commission's competition review, and ECO reports that the government expects it to close by July 2028.

A second phase

Montenegro wants to go further. Lufthansa has offered 1,351 million euros for the remaining 50.1 percent: 863 million in cash and a 5 percent stake in the Lufthansa group valued at 488 million. The Prime Minister said the government intends to make that swap "até 2028" (by 2028), but ECO notes that selling the majority needs the support of the PS or Chega in parliament, which the government has not had so far.

Montenegro said the deal points towards recovering the roughly 3.2 billion euros the State put into TAP after the pandemic. In a statement, TAP welcomed the Lufthansa group and thanked Air France-KLM.