The Lufthansa Group and the Portuguese government signed an agreement on Tuesday for Lufthansa to acquire an initial 44.9 percent stake in TAP Air Portugal for 1.025 billion euros, in a deal that remains subject to regulatory approval.

The signing took place at Humberto Delgado Airport in Lisbon. Lufthansa described it as a decisive milestone in the privatisation of the state-owned carrier. Completion depends on approval by the relevant authorities, in particular the European Commission.

Lufthansa said it would pay for the stake entirely from its available liquidity. The stake could rise to up to 49.9 percent if Lufthansa buys shares that were first offered to TAP employees, and with a so-called ticking fee the total price could reach up to 1.2 billion euros, the group said.

Carsten Spohr, Chairman of the Executive Board and CEO of Deutsche Lufthansa AG, said the two networks complement each other and open up growth opportunities in Portugal, South America, and Brazil. He said the group wants to help TAP’s success continue, “preserve its Portuguese identity” and develop Lisbon into a Lufthansa Group hub. He also thanked the Portuguese government for what he called a professionally managed privatisation process.

Lufthansa said Lisbon is set to become its seventh hub, with Porto, the Azores, Madeira, and the Algarve also part of its growth strategy. It said the growth plans centre on expanding TAP’s routes between Portugal and Brazil, Portuguese-speaking Africa, and North America. Its current market share in Europe-Latin America traffic is about nine percent, and combined with TAP, it would be about 20 percent, the group said.

The group said a minority stake already allows it to realise most of the synergies it estimates at up to 450 million euros. It also said it expressly welcomes the prospect of a full privatisation of TAP, since a majority stake would offer additional opportunities to accelerate growth and competitiveness.

The Portuguese government announced on October 14 that it had chosen Lufthansa over Air France-KLM, the only other bidder. Prime Minister Luís Montenegro said Lufthansa’s offer was 16 percent higher than its rival’s and carried “a lower degree of uncertainty”, according to Euronews. The government will keep a 50.1 percent majority, and it will reserve 5 percent of the shares for employees.

Lufthansa said its airlines currently operate 353 weekly flights to six destinations in Portugal, 75 percent more than in 2019. More than 500 people work for Lufthansa Group companies in Portugal, a number the group expects to exceed 1,000 direct jobs by 2030 with a new Lufthansa Technik site near Porto.

Sources: PR