TAP Portugal Part 2: bidders in its privatisation will focus on the airline's Brazil network

Savoy Capital, a potential bidder for TAP Portugal, has said that Portugal's Government "has to decide whether or not to exit the aviation business" (Dinheiro Vivo, 07-Oct-2014). Headed by ex-Continental Airlines president Frank Lorenzo, Savoy said that TAP has adopted a favourable strategy and the Lisbon hub is attractive.

If (as expected) the privatisation process is relaunched before the end of 2014, any potential bidder will need to be convinced that TAP can drive a more significant gap between its RASK and CASK in order to generate more attractive returns. Savoy seems to be the only non-airline company linked with a possible bid for TAP, for whom a strategic airline investor with a complementary route network might be the best option.

Following our recent analysis of TAP's financial performance, this second report on TAP looks at its key strategic asset: its Latin American network, in particular its operations to Brazil. We consider those airlines to whom TAP's position in this market may be of interest and so who may be preparing to make a bid in the privatisation.