IAG Said to Lead Race to Buy $1 Billion Stake in Portugal's TAP

IAG emerges as frontrunner in bid for Portuguese airline TAP

International Airlines Group (IAG), the parent company of Iberia and British Airways, is reportedly a frontrunner in acquiring a stake in Portuguese carrier TAP, valued at approximately $1 billion, according to industry analysts and bankers. The potential acquisition would mark a significant development in the European airline industry's ongoing consolidation trend.

At the recent Airline Economics conference in Dublin, aviation executives emphasized the need for consolidation in the sector, citing rising costs and price-sensitive consumers. They also noted that mergers would enhance European airlines' competitiveness against rivals from the US, the Gulf region, and Asia.

Executives from major European airlines anticipate that the Portuguese government will initiate formal talks regarding the sale of a minority or majority stake in TAP soon. A spokesperson for Portugal's Ministry of Infrastructure, which oversees the privatization process, stated, "The government continues to listen, evaluate market interest... but the sale will happen this year."

According to data from aviation analytics firm Cirium, 36 European airlines control 80% of seat capacity on the continent, compared to six in the United States. IAG, Air France-KLM, and Lufthansa have expressed interest in acquiring TAP, hoping to tap into its lucrative South American routes and establish a new southern European hub.

A banker familiar with the deal said that IAG, which also owns Iberia and Aer Lingus, is the most interested party and likely the strongest candidate to secure a deal with TAP. Analysts cite its success with Iberia in Madrid as a positive precedent for a potential multi-hub base in southern Europe.

Lufthansa has also been lobbying the Lisbon government as it seeks to expand its presence in southern Europe following its acquisition of a stake in Italian airline ITA Airways. However, Lufthansa declined to comment on the matter.

IAG's Head of Corporate Development, Jonathan Sullivan, told reporters in Dublin that the group is open to taking a minority stake that could also include "a path to a majority stake," reported Portuguese news outlet Observador last week. When contacted by Reuters regarding IAG's interest in TAP, the company stated that Sullivan emphasized that TAP would remain "a proudly Portuguese airline, just as Aer Lingus is a proudly Irish airline, and British Airways is a proudly British airline."

Analysts believe this approach could be crucial to IAG's potential success, as preserving TAP's national identity is important to Portuguese government officials. IAG's 2011 merger between British Airways and Iberia is widely seen as having largely maintained the Spanish airline's identity.

Political uncertainty in Portugal and regulatory scrutiny cast some uncertainty over the talks. "It looks like the timeline is moving a little bit and might end up being early 2026," said Dudley Shanley, an aviation analyst at Goodbody.

Portugal's previous Socialist government approved the privatization of at least 51% of TAP in September 2023. However, the sale was put on hold after the country held early elections in March 2024. Portuguese Prime Minister Luís Montenegro, who previously insisted on fully privatizing TAP, hinted in October that a partial sale could be considered after opposition parties raised concerns about a complete divestment.

If a minority stake of less than 20% were to be sold, Portuguese authorities could potentially avoid a review by the EU competition regulator in Brussels. Airline executives have cited the hesitancy of both the Portuguese government and EU regulators as key hurdles to further airline consolidation.

The recent sale of a stake in Italian airline ITA to Lufthansa took over a year of discussions with Brussels over remedies. Lufthansa ultimately had to give up airport slots at major hubs like Milan Linate to secure approval. Concerns from the European Commission also led IAG to abandon its planned acquisition of Air Europa, in which it holds a 20% stake.

Analysts suggest that IAG's ownership of Iberia could raise similar competition issues in the TAP bidding process and might require significant concessions, similar to Lufthansa's deal with ITA.