What has changed in the privatization of TAP since the sale approved by the Socialist Party

Exactly 21 months and 12 days ago, António Costa's government approved a decree-law reprivatizing TAP, which was ultimately derailed by a presidential veto and the resignation of the Executive shortly thereafter. The sale was almost going ahead under the previous government, but was halted by the rejection of the no-confidence vote. Now, it's once again on the verge of being finalized.

Finance Minister Joaquim Miranda Sarmento said a few weeks ago that the privatization decree-law will be approved “in the coming weeks,” meaning the bill will be sent to the Council of Ministers imminently .

But a lot has changed in the 651 days since Minister Fernando Medina announced the approval of the reprivatization decree-law in September 2023. First and foremost, the sales model.

The Socialist government, with an absolute majority, approved the sale of between 51% and 100% of the airline's capital , with 5% reserved for employees. This time, with the Socialist Party and Chega opposing the sale of a majority stake, it is already certain that the reprivatization will cover up to 49% of the capital . "Initially, we will sell less than 50% of the capital," the Finance Minister said this week in a statement to Bloomberg . What will not change is the 5% shareholding for TAP employees , a requirement of the Privatization Law.

The sale of a minority stake will allow for continued control over the company's strategic decisions and should prevent another veto from Belém . In October 2023, Marcelo Rebelo de Sousa returned the legislation to the government, requesting "clarification of three aspects he considers essential: the State's ability to monitor and intervene in a strategic company like TAP; the issue of the sale or acquisition of assets even before privatization; and the transparency of the entire operation."

The government has been stating that the brand, headquarters, strategic routes, and hub at Lisbon airport must be secured. Among the criteria for selecting candidates, which will be set out in the decree-law, will also be the expansion of TAP's operations . "We are trying to find an international partner that can help us develop the company, increase routes, the number of aircraft, and investment in the company, and then, of course, recover part of the money that taxpayers invested in the company four years ago," added the Finance Minister.

The airline's financial statements also changed during this period. TAP posted a profit of €177.3 million in 2023 , its highest ever. This profit fell substantially in 2024, to €53.7 million , with the accounts affected by exchange rate losses and provisions for lawsuits filed by crew members. New decisions unfavorable to the company may further increase the amount to be provisioned, with the main union representing crew members reporting amounts in the order of €300 million.

The latest figures released for the first quarter were again marked by a deterioration in net income, with losses increasing from €90 million to €108 million. TAP management explained this development by the Portugália pilots' strike and the fact that Easter fell in Brazil this year.

The company's results were also impacted by a sharp increase in personnel expenses, which almost doubled in the space of two years due to the end of salary cuts implemented as part of the restructuring plan and the negotiation of new company agreements.

The Portuguese carrier also recorded a 4.5% reduction in operating revenue in the first three months of the year , to €823.4 million. This trend contrasted with its main European competitors, driven by a 6% drop in revenue in Europe and Brazil. The company experienced a more intense competitive environment in the latter country, where its operations have been highly praised by groups interested in privatization.

What has not changed is the interest of Air France-KLM, Lufthansa, and the IAG Group (owner of companies such as British Airways and Iberia), which since 2023 have been reiterating their desire to bid for the sale of TAP, considered the last European airline with a significant size not yet integrated into a large group.

Although everyone has expressed a willingness to acquire a minority stake in TAP, some have expressed a preference for a majority stake or “a path to full ownership,” as an executive responsible for business development at the IAG group stated in January.

Management autonomy will be another central issue . The CEO of the owner of British Airways and Iberia stated in February that interest in TAP depends on "freedom to manage the company."

Consolidation in the sector has not stopped either . Lufthansa completed its acquisition of 41% of Italy's ITA Airways in January for €325 million, after a lengthy approval process with the European Commission. Last week , Air France-KLM announced its intention to increase its stake in SAS from its current 19.9% ​​to 60.5% , acquiring all the shares held by Castlelake and Lind Invest.