Lufthansa pays premium to beat Air France-KLM to strategic stake in TAP Air Portugal
Lufthansa Group is the Portuguese government's chosen strategic partner to acquire 44.9% of TAP Air Portugal. Lufthansa offered EUR1.025 billion for the stake, a sum that exceeded Air France-KLM's rival offer by 16%.
The price could rise to EUR1.2 billion for a 49.9% stake, subject to uptake of a 5% stake offered to TAP employees.
TAP's key strength is Europe-Brazil which complements Lufthansa Group's relatively small Latin American network. In addition TAP has a relatively young fleet and a lower cost base than Lufthansa.
It is profitable, but margins are being squeezed and Lufthansa is paying a premium for a minority stake. It will need to drive synergies to justify the price.
Conceptually, both revenue and cost synergies are possible, but there will be obstacles. Pilot unions have not been slow to express doubts.
Moreover, Lufthansa's flexibility might be limited by a lack of majority control and commitments about TAP's connectivity, routes, labour and hubs.
The transaction is subject to regulatory approval and is expected to close in 2028.
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