Air France-KLM Group has reiterated its interest in buying TAP Air Portugal. The Portuguese have been seeking to reprivatize their state-owned airline for months, whether partially or in an outright sale. But in a rush to consolidate across the aviation sector, other European carriers Lufthansa and IAG also have eyes on a deal.
Air France-KLM Group’s CEO Ben Smith re-stated the group’s interest in TAP Air Portugal in a press conference last Friday, telling reporters the airline’s well-established hold in the Brazilian market was a key part of the attraction.
We find (TAP’s) network into Brazil extremely powerful for us.Ben Smith, Air France-KLM Group CEO
Brazil’s air industry has bounced back quickly post-pandemic and returned to 82% of pre-Covid-19 traffic across 2022, with 97.85 million passengers. 15.62 million of those were international, and TAP Air Portugal carried 10%, just behind number one carrier, Brazil’s flagship airline LATAM Brasil.
With more than 10 flights to Brazilian destinations already in operation from Lisbon (LIS), TAP offers an off-the-shelf solution for Air France-KLM to increase its current offering of just three Brazilian airports – São Paulo, Rio de Janeiro and Fortaleza. A fourth routine flight to Belém will be added in May.
A scramble to consolidate and expand is taking place across the aviation sector. Air France-KLM has been keen to do a TAP Air Portugal deal for some time. However it’s possible they could again lose out to other interested buyers Lufthansa and IAG in a repeat of their failed exclusive negotiations to buy Italian carrier ITA. Lufthansa are now on the verge of closing an ITA deal this spring.
Meanwhile International Airlines Group (IAG) is at last on the cusp of acquiring Spanish carrier Air Europa after a four-year wrangle.
Although Smith told reporters Air France-KLM would be interested in TAP “if the right circumstances are in place”, the reality is that without a deal, Air France-KLM risk falling behind the consolidation curve happening across the sector.
The group has been hamstrung legally in its desire to acquire large stakes in other airlines since accepting Covid-19 bailouts from the French and Dutch governments. Having returned a net €728 million profit for 2022, increasing its year-on-year revenue by 84%, their aim is to refinance by April, allowing them to make more significant deals.
Smith acknowledged the difference the refinancing will make, saying “We are really pleased the constraints have been removed – we can negotiate with confidence and more legitimacy with any opportunities that present themselves.”