Lufthansa wins TAP tender – but has not yet bought the airline
Portugal picks the German group for a minority stake
The headline sounds like a completed takeover: Lufthansa is moving in at TAP Air Portugal. Looked at precisely, the case sits one step earlier. On 14 October the Portuguese government selected Lufthansa in the privatisation process. The group is initially to acquire a minority stake. What follows now is the drafting and signing of the transaction documents and the approvals of the competent authorities.
For readers this distinction is decisive. An award is a political and economic decision in favour of an offer. Ownership rights pass only when the transaction is completed. Lufthansa itself writes that it is working with the Portuguese state and its holding company Parpública on the contract documents, and that completion remains subject to approvals from the competent authorities. Statements that TAP has already been «bought» would therefore go too far.
What the first privatisation phase covers
The figures explain why the decision attracts so much attention. Portugal wants to sell 44.9 percent of the capital to Lufthansa. Should the stake of up to five percent reserved for employees not be fully taken up, Lufthansa's share could rise to as much as 49.9 percent. In this first phase the state remains the majority shareholder with 50.1 percent. According to the Portuguese government, the proceeds for the entire stake of up to 49.9 percent amount to 1.201 billion euros. Lufthansa puts its offer for the 44.9 percent at 1.025 billion euros and states up to 1.2 billion euros for up to 49.9 percent; on top of that, according to the company, come the shares initially offered to employees and a time-dependent additional component.
Portugal justifies the choice by saying the Lufthansa offer was financially higher and tied to less uncertainty than that of Air France-KLM. At the same time the government links the transaction to strategic undertakings: TAP's brand, headquarters and Lisbon hub are to remain in Portugal, and the connections to the island regions and to Portuguese-speaking markets are to be secured. Lufthansa in turn describes TAP as a long-standing partner in the Star Alliance and Lisbon as an important hub for connections across the South Atlantic.
These are intentions and contractual goals, not consequences that have already been implemented. The Portuguese government holds out the prospect of fleet expansion and stronger connections to Latin America. Lufthansa points to its industrial presence in Portugal and to planned employment effects. Whether, when and in what form these plans are realised depends on the conclusion of the contract, the conditions set by the authorities and later management.
What travellers can take from it
For travellers, above all one thing follows for the time being: there is no announced immediate effect. Neither has TAP published a change to its flight schedule, nor has Lufthansa set concrete ticket prices, cabin products or connecting offers as a result of the entry. Anyone who has booked a TAP flight or is planning a trip should therefore go by the airline's currently published fare and carriage conditions – not by expectations about a future group alliance.
Even so, the step is strategically relevant. After completion, Lufthansa would fold another national network airline into its group alongside SWISS, Austrian Airlines, Brussels Airlines and ITA Airways. TAP brings in particular a dense network between Europe, Brazil, other Latin American destinations and Africa. Precisely for that reason the competent competition authorities will scrutinise the transaction. A minority stake with operational influence is not automatically unproblematic in competition terms; the outcome of a review cannot be anticipated.
A second privatisation phase is possible but has not been decided. Portugal states that both bidders also submitted proposals for a later acquisition of a majority. For Lufthansa that would involve a further payment and possibly a share swap; according to the government, the state could receive a stake in a joint entity in that process. This, however, is a scenario for a separate procedure, not part of the first phase now selected.
The sober finding is therefore this: Lufthansa has won the race for a TAP minority stake. The deal has been chosen politically but is not yet concluded contractually or regulatorily. For the industry that is a big step; for passengers it creates no concrete change today.
