TAP Privatisation in Turmoil: IAG Considers Withdrawal as Azul Files 189 Million Euro Court Claim

The privatisation of Portugal's flag carrier TAP Air Portugal is facing its most serious turbulence yet, with British Airways parent IAG reportedly considering abandoning its bid just two weeks before the deadline for non-binding offers.

Bloomberg News reported on Thursday that IAG is leaning towards pulling out of the race, though no final decision has been made. The company could still submit a non-binding offer by the April 2 deadline but then choose not to pursue an actual deal, sources told the news agency.

Montenegro Draws a Red Line on Regional Airports

The potential withdrawal comes as Prime Minister Luis Montenegro doubled down on the government's requirements for any buyer. Speaking at a ceremony marking the 80th anniversary of Porto's Francisco Sa Carneiro airport, Montenegro was unequivocal.

"There will be no privatisation of TAP if we do not get a guarantee that our airports, including, naturally, Francisco Sa Carneiro airport, will get the potential, in terms of the company's activity, that they deserve and that are required in light of the country's strategic interest," he said.

The requirement that any buyer invest in all Portuguese airports -- Porto, Lisbon, Faro and the autonomous regions -- is described as a "cornerstone" of the privatisation process. It is widely seen as a direct challenge to IAG, whose strategy would likely focus operations on the Lisbon hub to feed its existing transatlantic and European network.

Three Bidders, Shrinking Field

Portugal relaunched the long-delayed privatisation of TAP in July 2025, after years of political debate and a controversial state bailout during the pandemic. The process attracted three bidders: IAG, Brazilian carrier Azul, and the Lufthansa Group.

Non-binding proposals must be submitted to Parpública, the state holding company, by April 2. These must include a financial component with a price offered for shares, future appreciation mechanisms, and industrial and strategic plans demonstrating synergies and guarantees for preserving TAP's status as an EU air operator.

The specifications provide for the sale of up to 44.9 per cent of TAP's capital, with 5 per cent reserved for workers. Any unsubscribed worker participation would be subject to the future buyer's right of preference.

Azul's Legal Challenge Adds Complexity

Meanwhile, Brazilian airline Azul has added a legal dimension to the already fraught process. The carrier has filed a court claim worth 189 million euros, arguing it is owed compensation related to the 2020 state rescue of TAP. Azul had previously held a stake in the airline and contends that the terms of the bailout unfairly diluted its position.

The claim introduces uncertainty for any prospective buyer and raises questions about potential liabilities that could affect the final sale price.

What It Means for Passengers and Expats

For the hundreds of thousands of residents and expats who depend on TAP for connections between Portugal and the rest of the world, the outcome matters enormously. TAP operates vital routes to Brazilian cities, African capitals, and North American hubs that no other carrier fully replicates from Portuguese airports.

If IAG walks away, the field narrows to Lufthansa and Azul -- two very different visions for the airline's future. Lufthansa would likely integrate TAP into its European network alongside Swiss, Austrian, and Brussels Airlines. Azul, with its Brazilian roots, might prioritise the transatlantic Portuguese-speaking routes that make TAP unique.

A failed privatisation remains a possibility. If the government's conditions prove too restrictive for all three bidders, Portugal could find itself back where it started: sole owner of an airline it has long wanted to sell.

The April 2 deadline will be the first real test of whether this privatisation has a future or is heading for another postponement.