Final Offers for
TAP Air Portugal Sep/Oct 2025

TAP was founded in 1945, privatised in 1953 (albeit with majority state-ownership), and nationalised in 1974 in the wake of the collapse of the Salazar’s dictatorship.

A proposal by SAirGroup (the airline formerly known as Swissair) to acquire a 35% in the early 2000s fell by the wayside as it itself collapsed into liquidation. An attempt to revive a sale in 2003 failed in the absence of any viable buyer.

In the aftermath of the 2008/9 Global Financial Crisis, Portugal virtually went bankrupt and had to be bailed out by the IMF and EU to the tune of €78bn. One of the conditions, apart from austerity packages, was that it should sell TAP Air Portugal.

Held over a financial barrel, Portugal announced it would sell 66% of its stake in the airline, reserving 5% for the carier’s employees.

The sole bid in 2012 came from German Efromovich’s Synergy Aerospace — the then majority, and somewhat dubious, owner of Colombia’s Avianca. That failed because of a failure of trust on guarantees he offered.

Three years later David Neeleman, then running Azul, successfully bid for a 61% stake in the airline through his Atlantic Gateway consortium for up to €360m. But then, at the beginning of 2016, a new left wing government rewrote the agreed deal to leave the consortium with a 45% stake (but 90% of the economic rights), the State with 50% (and employees 5%). Nevertheless, under the Atlantic Gateway management, the company grew strongly for four years.

It renewed the fleet, increasing the number of aircraft by 40% over the period, doubled services to North America, increased passengers carried by 50% (a 10% annual growth); and in 2017 achieved a record — at least for TAP — operating profit margin of 4%.

The Covid-19 pandemic brought TAP to its knees; and it begged the government for support as it ran out of cash in mid-2020. The onerous terms of the €1.2bn six-month loan offered forced Neeleman to bow out of the Atlantic Gateway consortium and sell his 22.5% stake back to the government.

In the end Portugal pumped in €2.6bn to bail out its flag-carrier. The restructuring aid was approved by the European Commission with some conditions: disposal of 18 slot pairs, 10% of TAP’s holding at the congested Lisbon base (they went to Ryanair and easyJet); a cap on the fleet size; disposal of non-core activities; and, a ban on acquisitions. The approval paved the way for the full re-nationalisation of the airline.

The restructuring plan envisaged a transformation of TAP’s operations “to ensure economic viability in 2023 and sustainability in 2025”. It seems to have partly worked. In 2023, while passenger numbers were still 7% below the pre-pandemic peak, TAP achieved revenues 26% higher than in 2019; and it produced operating profits of €386m reflecting a record margin of 9.2%.

A plan for re-privatisation was first initiated by the centre-left government of António Costa in 2023, when financial advisers valued TAP at between €800mn and €1.1bn. The process was halted when Costa resigned over corruption allegations against government officials. It restarted when Luís Montenegro of the centre-right Social Democratic Party took power in 2024 but was suspended again earlier this year when he in turn became embroiled in an ethics scandal that forced him to call an election — the country’s third in three years.

The new timetable

The latest relaunch — formally opened mid-2025 — targets a sale of 44.9% to a strategic partner while reserving an additional 5% for employees (leaving government control of the remainder). The stated government objective is explicit: find an investor capable of delivering global scale, operational know-how and strategic development of Lisbon as a genuine connecting hub. The plan imposes conditions intended to protect TAP’s brand and core route network, particularly services to Brazil and other lusophone countries.

The government invited “manifestations of interest” by the end of November and set out a sequence of non-binding and binding offers designed to compress bidders into a shortlist. The public timetable envisages transaction close within roughly 12 months of the relaunch, though Lisbon has left room for political approvals and guardrails that could slow or reshape any outcome.

At the time of the announcement Luís Montenegro explained: “We took this decision because we have already spent a lot of money... We do not want to continue pouring money into a bottomless pit”. He also said that the government expected TAP’s privatisation to also draw interest from major airlines outside the European Union, citing the carrier’s “untapped potential”.

The Government has specified a minimum investment of €700m for a 44.9% stake, suggesting an equity value of €1.6bn and an enterprise value of €3.9bn. On the 2024 results, this values the TAP group at a fairly racy EV/EBITDA of 4.5x.

Strengths and weaknesses

TAP is the 12th largest European airline (depending on which measures you use) with passenger traffic in 2024 of 16.1m and a fleet of 101 aircraft.

It is based at Lisbon’s Humberto Delgado Airport — the twelfth busiest in Europe with 35mppa (and the busiest single runway airport on Continental Europe) — where it controls half of the slots. Lisbon is a natural geographic gateway hub to South America, and particularly Brazil where, given strong linguistic and cultural connections, there is good point-to-point O&D demand that can support hub-feed operations throughout its European network (50% of its Brazilian traffic transfer from or on to connecting flights). TAP is the largest European operator to Brazil serving 13 destinations in the country, and accounts for 22% of the capacity on the route (see graph), just behind LATAM on 24%. Brazil accounts for half the airline’s long haul capacity (in ASKs) and a third of the airline’s total output.

During the Atlantic Gateway management period, TAP doubled its services to North America where it now serves 10 destinations. (Thanks to the delights of spherical geometry, it offers the shortest flights between Europe and the East coast of the US.) Constrained at Lisbon, it has also added flights from Oporto, Portugal’s second largest city to Boston and Newark (and an intriguing route between the Azores and San Francisco). The North American routes account for 20% of its total capacity.

Seen as strategically important by the Portuguese Government are the links to the other lusophone destinations — Angola, Mozambique, Cape Verde, São Tome y Principe and Guinea Bissau — as well as the Portuguese autonomous regions in the Atlantic of the Azores and Madeira. Important niche destinations they may be, but operations on these routes account for less than 10% of TAP’s total capacity.

European short haul operations account for a third of total output, but TAP concentrates its services into Lisbon, to feed its hub, while offering a handful of routes from Porto. Portugal in a European context is a favoured tourist destination: in 2024 the country, with a population of 11m, welcomed 29m non-resident visitors, with a vast influx from cold northerners in the UK, France and Germany. And the vast majority of European tourists target the Algarve (the most convenient airport being at Faro) or the Douro valley near Porto. The low cost carriers have made huge headway: Ryanair and easyJet between them carry nearly 50% of passengers.

Lisbon airport is conveniently situated — only 7km outside the city centre — but is heavily slot-constrained. The Portuguese have been discussing a replacement for the past 35 years. A new airport had been planned to open in 2017, but was abandoned after the IMF/EU bail out in the wake of the Global Financial Crisis. The Portuguese Government finally gave the approval in 2024 for a new two-runway airport to be built at Alcochete some 40km outside the city. To be named Luís de Camões Airport, it is not expected to open until 2034.

Recent results

TAP Air Portugal achieved its best ever operating margins in 2023 and 2024. It benefited strongly from the general squeeze on capacity and ticket price inflation in the industry while keeping a tight control on costs as it restructured under government ownership.

But so far in 2025, its financial results have been under pressure. For the nine months ended September it achieved a 3% growth in capacity and 6% in traffic (3% growth in passenger numbers), but a 2% decline in unit revenues. Total revenues were on a par with those in the prior year period at €3.3bn. Benefiting from a more benign fuel price this year total unit costs grew by 1%, but underlying unit costs excluding fuel increased by 6%. Underlying operating profits fell by a third to €227m providing an operating margin of a mere 7%.

The company points out in its presentation on the results that “punctuality at its Lisbon hub remains a challenge”. Affected by strikes, air traffic control and infrastructure constraints, TAP achieved an on-time performance (within 15 minutes) at Lisbon of only 52% for the nine month period. It takes some ironic satisfaction that its 46% on time performance in the third quarter was better than the 42% achieved by all airlines at the airport in the period.

And then, just before the deadline for offers, TAP’s HQ was raided by police over suspicions of fraud in the 2015 privatisation involving Atlantic Gateway ten years ago. The Communist Party leader Paulo Raimundo bluntly said "we had already established that TAP was bought with TAP’s money, TAP’s aeroplanes were bought with TAP’s assets, [there was] no investment from those who supposedly bought TAP. And so, let the investigation be carried out”.

Who will get the deal?

As the deadline passed on 22 November, Portugal’s state holding company Parpublica stated that it had received only three expressions of interest for the offered stake in TAP — all from the three European major network carriers, IAG, Lufthansa Group and Air France-KLM. Parpublica said in a statement it has until December 12 to assess whether the interested airlines meet the criteria, including at least one year of revenue above €5bn in the last three years and financial capacity.

IAG has said that it views TAP Air Portugal as complementary to its Iberia/Aer Lingus/BA/Vueling portfolio. IAG emphasises that a TAP investment could be used to build Lisbon as a trans-Atlantic gateway in parallel with its Iberia operations in Madrid — seeing them as complementary hubs with differentiated traffic flows (Portugal’s lusophone vs. Iberia’s hispanic flows). IAG’s successful integration of Aer Lingus — maintaining the brand as an independent carrier, growing long-haul from Dublin without collapsing routes into London — is seen as the precedent for how TAP might be treated within IAG. A positive for IAG is its very “plug-and-play” corporate structure: common “back-office” non customer-facing functions (purchasing, planning, FFP) while keeping the individual airline brands independent, each competing for efficient use of the Group’s capital. IAG has also been explicit in saying it would expand Lisbon’s hub role if it were to invest.

According to Reuters, a spokesman for the Group stated: “TAP will have significant potential within IAG … Our track record demonstrates how we invest to strengthening our airlines, benefiting customers, employees, local economies and shareholders”. However, he apprently stressed that “several issues need to be clarified before IAG can propose an investment”.

It would no doubt want to bring TAP within the oneworld alliance (and hope that it could bring TAP into the transAtlantic immunised joint venture with American). IAG might largely avoid political objections by arguing that Iberia and TAP serve different national interests and markets — though the government will still insist on enforceable hub and route protections, and despite historic antipathy between Spain and Portugal. IAG has the financial strength and, following the failure of its bid to acquire Air Europa, has no ongoing integration deals.

Lufthansa Group and Air France-KLM are also evident suitors. Both cite potential network and joint-venture synergies, particularly for feed into global networks and for strengthening European connectivity. For Lufthansa, a TAP stake would strengthen connectivity into Latin America and lusophone Africa, where it is relatively weak, while giving better access to Portugal’s tourist/leisure flows. Lufthansa said its aspirations as an investor took into account TAP’s “great strategic importance to the European aviation industry”.CEO Carsten Spohr stated: “As a long-standing partner in the Star Alliance and with our extensive investments in Portugal, we continue to see the Lufthansa Group as the best partner for TAP and for Portugal.”

Air France-KLM might see TAP as a complementary feeder and a way to shore up French/Portuguese market access and increase its presence to give the Group a commanding position on the South Atlantic (and a third of the capacity into Brazil). Both groups, as in the case of IAG, would bring deep operational and alliance expertise that could extract synergies on procurement, maintenance and engineering. But neither have the clear corporate structure that IAG has; and both are in the process of ingesting new problem acquisitions: SAS for Air France-KLM and ITA for Lufthansa. The Portuguese government has voiced a preference for a partner that will not simply subsume Lisbon into a rival hub. Both Lufthansa and Air France-KLM would need to make credible guarantees to preserve Lisbon’s hub status.

A minority investment is clearly not ideal: all three would want the opportunity to take a majority stake and have full control at some time.