In the summer of 2025, the government of Portugal relaunched a project to privatize national carrier TAP Air Portugal, with the goal of selling a large stake within a year or so. All too often, not much comes of these kinds of projects, though it seems like this is moving along nicely.
Several months back, we learned how both Air France-KLM and Lufthansa Group were interested in investing in the airline. There’s now a major update, as we have more details about the offers, with both Air France-KLM and Lufthansa Group submitting binding offers.
TAP Air Portugal privatization effort underway
Portugal’s government is currently working on an effort to privatize TAP Air Portugal, with the goal of selling a 44.9% stake, with the possibility to give up a majority stake over time. As part of this, employees would also be offered a 5% stake in the company (meaning that the government would own 50.1% of the company).
The last round of privatization efforts stalled in early 2025, when the country’s center-right minority government collapsed. The coalition returned to power after a May 2025 election, but didn’t have a majority in parliament, potentially causing a sale to be blocked.
Historically, TAP hasn’t been a terribly profitable airline, but its performance has improved over time. In 2021, the airline reported a record €1.6 billion loss, following the coronavirus pandemic. This caused a restructuring, which saw the government invest €3.2 billion in the company.
The airline has returned to profitability in recent years, though we’re talking about fairly mild profits. The company’s profits over the past four reported years (2022-2025) have been €65.6 million, €177.3 million, €53.7 million, and €4.1 million.
While TAP Air Portugal isn’t independently some massively profitable airline, the company offers some significant synergies for other airline groups. TAP has a strong network to Brazil, to Africa, and to the United States. This obviously holds significant strategic value for several airlines. For that matter, a large goal with acquisitions is simply to prevent competitors from getting in on the action instead.
The challenge is, it’s kind of hard to figure out how North America operations would complement the existing arrangements of airline groups. Obviously North America to Europe flying is heavily dominated by joint ventures (split by alliance, sort of), which have a lot of pricing power.
Historically, TAP has operated pretty independently to North America, often undercutting other carriers on price, with attractive fares in all cabins, including for one-way flights. Could we see TAP join one of the major joint ventures? Obviously it would totally change the carrier’s pricing model and market position.
Then there’s the whole issue of regulatory approval. Getting regulatory approval for such a deal will be no small task, given the number of parties that have to sign off on agreements like this, and the concessions required.
Air France-KLM & Lufthansa Group submit binding offers
Initially, all three of the major European airline groups — Air France-KLM, IAG, and Lufthansa Group — were interested in TAP Air Portugal. However, eventually IAG withdrew its interest (I’d guess in part because it realized how tough regulatory approval would be, given its ownership of Iberia), leaving Air France-KLM and Lufthansa Group.
Both airlines have now submitted binding offers. Air France-KLM is making what I’d consider to be the more compelling argument for acquiring TAP, or at least it’s more willing to make the case publicly.
Air France-KLM argues it would position Lisbon as its unique Southern European hub, reinforcing the group’s global network, and expanding connectivity in key markets, in particular in the Americas and Africa. TAP would enter the group’s global commercial network, and the goal would also be to get TAP into the SkyTeam transatlantic joint venture. TAP would also partner with Delta on codesharing, loyalty, etc.
The vision goes beyond that, with TAP joining the Flying Blue program, and the companies working more closely together on maintenance. The airline group has also smartly argued that this deal would be more likely to result in labor peace, and it’s also what pilots at TAP have come out in favor of, given the mess that is Lufthansa Group labor relations.
Here’s what Air France-KLM CEO Ben Smith had to say about this proposal:
“For the past three years, our teams have worked closely with Portuguese stakeholders to come up with our strongest proposal for TAP. What we have submitted today is not just a proposed price for an airline. It is a strategic, extensive, and comprehensive long-term plan for TAP and for Portugal as a whole. It is also a vision of where we would like to take this esteemed flag carrier, expanding on the legacy of what has been built by TAP’s talented people over the past 81 years. Moreover, we are pleased to count on the support and alignment of our long-time partner Delta Air Lines. Our overarching goal to ensure long-term growth for TAP, not only in Lisbon but also in Porto and other cities in Portugal, and to do so sustainably, as part of a robust and international group determined to bring value to its airlines’ home countries. Through this offer, Air France-KLM reaffirms its commitment to create a European global aviation champion, actively supporting European sovereignty.”
Lufthansa isn’t being quite as detailed in publicly explaining its logic for bidding on the airline. The airline group explains it has experience developing national airlines, including SWISS, Austrian, Brussels Airlines, and ITA Airways, while preserving their national identities. The airline group also argues that it offers the necessary scale, experience, and financial stability, to create sustainable value.
Lufthansa Group would strengthen Lisbon’s position as a strategically important Atlantic hub within the group’s network, strengthening service to Latin America, Africa, and North America. Here’s what CEO Carsten Spohr had to say:
“The Lufthansa Group stands for a long-standing, trusted, and strategic partnership with Portugal. For decades, we have been investing in Portugal, creating and securing skilled jobs, and connecting the country with Europe. Our interest in taking a stake in our Star Alliance partner TAP Air Portugal is the next logical step. We want to strengthen Portugal’s national airline as part of the Lufthansa Group and as the leading airline for the South Atlantic, with Lisbon as a strategic hub. With SWISS, Austrian Airlines, Brussels Airlines, and ITA Airways, we have demonstrated how the European integration of our Lufthansa Group secures prospects and growth for our home markets and hubs.”
Bottom line
The government of Portugal is looking to privatize TAP Air Portugal, initially hoping to sell a 44.9% stake (with an additional 5% going to employees), but the government is open to giving up majority control over time. While the goal of privatization has been there for a long time, this is now closer to becoming a reality.
Both Air France-KLM and Lufthansa Group have submitted binding offers for TAP. The government is now going to review these offers, and is expected to make a decision in the coming months. It sure seems to me like there’s more upside with an Air France-KLM deal than a Lufthansa Group deal, though only time will tell how this plays out.
Would you rather see Air France-KLM or Lufthansa Group invest in TAP?