The Cabinet Read Parpública's Report on TAP and Chose Neither Bidder: Air France-KLM and Lufthansa Get Three Weeks to Improve

The Council of Ministers read Parpública's report on the two binding offers for TAP on Friday and decided not to pick a winner. Instead it opened an extra round. Air France-KLM and Lufthansa, the only two groups still in the process, have been invited back to negotiate and to file what the gazette calls final and improved binding proposals.

The minister for the Presidency, António Leitão Amaro, told reporters after the meeting that the round would take "some weeks, not months". The legal instrument that gives effect to the decision is more precise than he was. Resolução do Conselho de Ministros n.º 176-A/2026, published on Friday in a supplement to Diário da República n.º 172/2026, Série I, sets the negotiation stage at three weeks.

It also does something the press conference did not mention. It extends the deadline for the whole reference direct sale to 31 December 2026.

What the resolution actually orders

The document is short and almost entirely operational. Point 1 determines that a negotiation stage exists for the purpose of receiving final and improved binding proposals, under article 4(2)(d) of Decreto-Lei n.º 92/2025 and article 21 of the caderno de encargos (tender specification) approved as annex I to Resolução do Conselho de Ministros n.º 141-B/2025, and invites Air France-KLM, S.A. and Deutsche Lufthansa Aktiengesellschaft to take part in it, "com a duração de três semanas": with a duration of three weeks.

Points 2 and 3 tell Parpública to send the invitation and to set out, in the process letter, the terms and conditions of the negotiation and the content and terms in which the improved proposals must be presented.

Point 4 is a small detail with a practical edge. Parpública must state in the process letter that documents and information relating to the final and improved binding proposals may be submitted in English, without a certified Portuguese translation. Neither bidder is Portuguese, and translating a full airline transaction file into Portuguese to a certified standard is expensive and slow. Removing that requirement at this stage is a signal about how tight the calendar is.

Point 6 authorises Parpública to sign as many confidentiality agreements, including addenda to the ones already signed with the bidders, as it considers necessary or convenient to regulate access to commercially sensitive information. In other words, the two competitors are about to be shown more than they have seen so far.

The three weeks are not the calendar that matters

Point 5 delegates a set of powers to the ministers responsible for finance and infrastructure. Among them, expressly, the power to adjust the deadline for presenting the final and improved binding proposals during the negotiation stage, and the power to extend the deadline for the report that Parpública must produce afterwards.

So the three weeks are a starting position that two ministers can move without going back to the Council of Ministers. What cannot be moved without a new resolution is the outer limit in point 7, and that limit is 31 December 2026.

Point 7 is the most informative paragraph in the document, because it lists what still has to happen inside that window. The negotiation stage has to conclude. The final and improved proposals have to be filed. Parpública has to produce a fresh report on them, applying article 19(1) as adapted by article 21(3). The government has to select a proposal under article 23. It has to approve the drafts of the contractual instruments. The selected bidder has to accept them. Any complaints about those drafts have to be decided under article 24(2). And then the instruments have to be signed under article 25.

That is eight steps in under four months, three weeks of which are already booked for the negotiation itself. It is a workable timetable, but it is not a loose one, and the government has written the possibility of slippage into the delegations rather than into the deadline.

Why the Cabinet did not choose

Leitão Amaro's explanation was that the two offers scored too closely to separate. "The proposals have an overall evaluation so close, even being different, that they justify this effort of final negotiation with both," he said, so that afterwards, "in the light of improved proposals, we take the decision of choosing the single competitor that will do the very final negotiation, then with only one."

The resolution's own preamble puts the same thing in the language of the tender documents. Parpública produced the report required by article 19(1), describing the proposals in detail and appraising the absolute and relative merit of each against the selection criteria in article 5(6). The Council of Ministers received and analysed it, and then, "without prejudice to the absolute merit of each proposal", concluded that the optional negotiation stage provided for in article 10(2) and article 21 was justified.

Two things follow from that phrasing. The first is that this stage was always available in the rules; the government has not invented a step, it has exercised an option it wrote for itself a year ago. The second is that "without prejudice to the absolute merit of each proposal" is a careful formula. It says the offers are good enough on their own terms. It does not say either of them is good enough to accept as filed.

Asked whether Parpública's report named a preferred bidder, Leitão Amaro declined to say, arguing the government needed a degree of reserve "that allows the Portuguese state's possibilities to be maximised". Asked what the state wants out of this round, he said he understood the curiosity, which "will also be the competitors'", and did not answer. He did say that price "is naturally an important criterion but is not the only one", pointing to routes, the diaspora and the industrial project.

What is being sold

The transaction is a reference direct sale of shares representing up to 44.9 percent of TAP's capital, under Decreto-Lei n.º 92/2025 of 14 August 2025 and the Lei-Quadro das Privatizações (Privatisations Framework Law). A further 5 percent is reserved for the airline's own workers, and any part of that tranche they do not take up can be bought by the selected investor under a right of preference. The maximum the state can end up selling in this phase is therefore 49.9 percent.

The process has moved in defined stages. The first tested preliminary interest and eligibility. The second was opened by Resolução do Conselho de Ministros n.º 212/2025 of 24 December 2025, which authorised Parpública to invite Air France-KLM, Lufthansa and International Consolidated Airlines Group to file non-binding proposals; IAG did not file one. Resolução do Conselho de Ministros n.º 75-B/2026 of 27 April 2026 then selected the two remaining offers and authorised the invitation to file binding proposals. Both did, on 29 July. Parpública handed its report to the government on 1 September.

The bidders' side

Air France-KLM responded the same day in a note to Lusa. The group said it takes note of the Portuguese government's decision to proceed to an additional round, that its continued participation "reflects its unaltered interest in TAP", and that it awaits the next phase "with expectation". It described its proposal as covering every area of the business, including passenger, cargo, loyalty programmes and maintenance, repair and overhaul, and said Delta Air Lines, its joint-venture partner, supports and is aligned with the offer.

Lufthansa did not comment publicly on Friday.

The MRO reference is not decorative. TAP's maintenance arm has been pitching itself into Europe's rearmament cycle, and it is the part of the group whose value is least tied to the Lisbon hub. Both bidders know the industrial project is one of the criteria the government says it is weighing.

The results in the background

TAP reported a first-half net loss of 99.2 million euros on Monday, a 40 percent deterioration on the same period last year, driven by a fuel bill up almost a fifth. Asked whether that changes the negotiation, Leitão Amaro said it does not, and pushed the emphasis onto revenue: sales were "historically high, among the highest anyone remembers", the business expanded, and what also happened was cost pressure from the international crisis. Valuations, he said, always take account of circumstantial factors as well as structural trajectories.

That is a defensible reading of a half-year in which revenue and passenger numbers both grew about 4 percent. It is also the argument a seller makes when the asset's headline number is worse than it was a year ago and the sale is three weeks from a decision point.

What to watch

Three weeks from Friday is 25 September, and nothing in the resolution requires the government to announce anything on that date. The first observable event will be Parpública's second report, which is not published, followed by a further Council of Ministers resolution selecting one bidder for what the minister called the very final negotiation.

Meanwhile the airline is being run by a chief executive whose mandate expired twenty months ago and has not been renewed. Whoever buys the stake will inherit that question along with the fleet.