TAP Air Portugal privatisation to come “before summer”

TAP Air Portugal’s privatisation is likely to “come out before summer”, according to the airline’s CEO and chairman Luis Rodrigues. Speaking at the airline’s 75^th anniversary event held in London on May 14, Rodrigues said: “We have a new government that has been in place for about a month now and they’re getting acquainted with the administration. It’s a complex issue; I trust it will come out still before summer but I don’t mind if it takes a bit longer.” Portugal named its new centre-right leader Luis Montenegro of the Social Democratic Party (PSD) as prime minister in March this year. Montenegro had reportedly expressed interest in fully privatising the airline in December 2023 prior to being elected. The previous government had initially approved the sale of 51% of the airline in September 2023, according to a report by Reuters. When asked if there are still plans for a full privatisation, Rodrigues said: “That still needs to be discussed between the shareholders, the political parties, and the opposition. The government should determine its position and then discuss with potential buyers how that will evolve.” Others are not convinced that a decision will be made by summer. An expert familiar with the privatisation process indicated that the government was in disarray with the Democratic Alliance – made up of the PSD and two smaller conservative parties – earning only a narrow victory and opined that it was unlikely any sale would complete this year. Rodrigues seems confident however: “The government took the first significant step by announcing the location of a new airport,” he said. “That’s an indication that they’re focusing on the right things, and we are expecting that to continue.” Following decades of contentious discussions over the location of the new airport, Montenegro announced the new international airport in Alcochete, just over 20 miles east of Lisbon on the same day as the anniversary event. It is expected to be ready by 2034. TAP has been seeking buyers from the aviation sector that were aligned with its strategic goals, attracting interest from International Airlines Group (IAG), Lufthansa Group, and Air France-KLM. When asked if there was still interest from these companies following the change in government, Rodrigues said that there was “no indication” in interest faltering and that it was more a matter of “waiting for the government”. Air France-KLM CEO Ben Smith expressed a continued interest in TAP in an earnings call on May 3, 2024, saying that while it is “still a bit early”, there is “unquantifiable value of having a strategically located hub in Western Europe”. Smith said: “When you have a very slot-constrained airport like Lisbon that the potential remedies would be high, and we’ve got a good idea on what is necessary for the business case to make sense.” Air France-KLM, like many European airline groups, is interested in extending its reach and has indicated that it may extend its 19.9% stake in Scandinavian Airlines (SAS) to take a majority share. IAG, via Iberia, is also working to finalise the acquisition of Air Europa with the European Commission. The airline group announced in February 2023 that it had agreed to purchase 80% of Air Europa for €400 million. In its first quarter 2024 earnings call, IAG CEO Luis Gallego said it expected to reach a solution for the deal by July this year. At IAG’s capital markets day in November 2023, previous Iberia chairman and CEO Fernando Candela said: “TAP can be a complimentary option to this deal with Air Europa in order to have access to an important market like Brazil.” Candela added that the Brazil market “is a huge potential and we don’t have a lot of capacity there.” Candela was succeeded by Marco Sansavini in April 2024. Sansavini did not discuss TAP during IAG’s first quarter 2024 earnings call. TAP’s first quarter 2024 results showed operating revenues climbing modestly by 3% to €862 million, although with the 8% hike in operating costs the airline posted a net loss for the quarter of €71.9 million. Labour costs had jumped 57% as a result of new employee agreements that will continue to have an immediate impact on the bottom line, but Rodigues says such an investment “will continue to pay off”. A source confirmed that there would be no hiring freeze or reduction of staffing, though the airline would need to be more wary over rising staff costs.