The International Airlines Group (IAG), the Anglo-Spanish aviation group which owns British Airways and Iberia, is considering the possibility of acquiring TAP Portugal. According to The Times, the group is considering both the purchase of EasyJet and TAP. “We are a platform for consolidation. We will only do what makes sense, but we see that there are opportunities to be stronger. We are a group that wants to consolidate the industry,” said the group’s CEO, Luis Gallego, quoted by The Times.
IAG joins Air France-KLM and Lufthansa on the list of those interested in buying TAP, after António Costa admitted his intention to privatize the airline within a year. Air France-KLM’s CEO, Ben Smith has said the group has been eyeing the southern Europe region and would ‘definitely engage on a formal basis’, according to Simple Flying. “If the right circumstances are in place, we’re interested. Consolidation is key for us, especially in Europe,” said Smith.
We see that there are opportunities to be stronger. We are a group that wants to consolidate the industry.Luis Gallego, IAG CEO
TAP Air Portugal, which was founded by the Portuguese state in 1945, sold off in 1953, and re-nationalized after the 1975 Carnation Revolution, has yo-yo-ed between private and public ownership during its recent history too. In 2015, the Portuguese government was forced to sell off 61% of the company to secure an IMF rescue package. It took back control again just a year later.
Lufthansa, like Air France-KLM, wants to expand, notably toward Brazil. The flagship German carrier has been interested in TAP since way back in 2019, a year before Atlantic Gateway investors David Neeleman and Humberto Pedrosa re-sold part of their TAP stake to the Portuguese government, after controversial bonuses awarded to managers.
With the Portuguese government owning 72.5 % and bailing TAP out to the tune of $2.5 billion after the company made losses of $1.5 billion last year, they will be hoping to secure a deal with a major partner as soon as possible.
IAG, which is experiencing a moment of financial health, is looking to move towards consolidation in the civil aviation sector and the acquisition of TAP would be important, particularly for its connections to South America, with special attention to the Brazilian market.
In late September, the prime minister said that the privatization of TAP “is a possibility on the table for the next 12 months”, underlining that it would be irresponsible to have a deal where the state would lose money in the transaction.
Lufthansa and Air France-KLM are currently the front runners in the negotiation process. Lufthansa may just have the upper hand, as a fellow member of Star Alliance, the world’s largest global airline group, serving 195 airports with nearly 20,000 flights a day and carrying more than 10 times the passenger numbers of Air France-KLM.
Meanwhile, if Air France-KLM were able to pull off a deal, it would represent not just a coup but the latest purchase in a shopping bonanza for them in southern Europe. The group is already part of the preferred bidding consortium chosen by the Italian government to take control of ITA.