Lufthansa wins race for €1.2 billion stake in Portuguese carrier TAP

By Sergio Goncalves and Joanna Plucinska

LISBON, Oct 14 (Reuters) - Portugal's government on Wednesday picked Lufthansa to buy a 44.9% stake in TAP Air Portugal for €1.2 billion ($1.3 billion) over rival Air France-KLM, making the German airline the strategic partner of one of Europe's last unaligned flag carriers.

The deal, years in the making and repeatedly delayed, is the next step in the consolidation of Europe's airline industry, a process seen as necessary to help smaller national carriers become more resilient as part of larger groups.

Analysts and industry executives say that is likely to accelerate as soaring jet fuel prices linked to the war in Iran force weaker airlines to work with larger, better-capitalised groups.

Lufthansa, which already owns Austrian Airlines, ITA Airways and SWISS among other carriers, beat rival Air France-KLM after both airlines submitted improved final bids in late September.

"This will give them an additional hub, albeit in a sphere of influence where they've lacked reach currently," said aviation analyst John Strickland, as Lufthansa will gain further access to Southwest Europe and other parts of the world by extension.

TAP's main attraction is its valuable landing slots connecting Lisbon with Brazil, Portuguese-speaking Africa and the US, routes that underpin Portugal's diaspora ties, tourism flows and investment links.

Prime Minister Luis Montenegro told a news briefing the winning bid exceeded Air France-KLM's offer by 16%.

Speaking at the World Aviation Festival in Lisbon before the announcement, TAP CEO Luis Rodrigues said joining a larger group would allow the Portuguese carrier to "access a larger pool of resources at better value".

THE PERKS

The government said its decision was based not only on price but also on each bidder's industrial plan for TAP, including its strategy for the airline's growth and long-term sustainability.

It wants TAP's partner to expand operations and connectivity across Portugal's airport network, not only at Lisbon's hub but also in Porto, Faro, the Azores and Madeira.

Infrastructure Minister Miguel Pinto Luz said the Lufthansa Group has committed to increasing TAP's fleet by a further 117 aircraft by 2035 and by another 130 after 2035, when Lisbon's new airport is expected to be operational.

As of June, TAP operated a fleet of 101 aircraft serving 93 destinations worldwide — 52 in Europe, 16 in South and Central America, 14 in Africa and 11 in North America.

TAP carried a record 8.2 million passengers in the first half of 2026, up 4.2% from a year earlier, while operating revenue rose 4.3%.

A ROCKY ROAD AHEAD

Analysts pointed to Lufthansa's ongoing financial woes as a potential challenge in TAP's turnaround. Such deals require initial investment, and the pay-off isn't always guaranteed.

"Lufthansa is still struggling financially. Lufthansa Deutsche Airlines, as the largest part of the group, is still losing money. It has to get its own house in order," Strickland told Reuters.

Lufthansa has vowed to reach an operating profit of 8% to 10% between 2028 and 2030 and to simplify and centralise its operations in an effort to rebuild investor confidence.

The turnaround of Italy's ITA is still ongoing, too, Strickland said, with investors and analysts previously worrying about the impact of Lufthansa's fragmented and spread-out network.

(Reporting by Sergio Goncalves and Joanna Plucinska. Editing by Andrei Khalip, Mark Potter and Jan Harvey)