Lufthansa Wins TAP Air Portugal: A €1.2 Billion Bet on the South Atlantic

Lufthansa Wins TAP Air Portugal: A €1.2 Billion Bet on the South Atlantic

Lufthansa takes 44.9% of Portugal's flag carrier

Portugal's government named Lufthansa Group its preferred partner for TAP Air Portugal on October 14, ending a contest that began when Lisbon announced plans to sell a minority stake in July 2025. Prime Minister Luís Montenegro said the German group will take 44.9% of the airline and beat Air France-KLM, the only other bidder left in the race. It is Portugal's third attempt to sell TAP, after failed efforts in 1998 and 2015.

Lufthansa's offer came in 16% higher

Montenegro told a news briefing that Lufthansa's financial proposal exceeded Air France-KLM's by 16% and carried less uncertainty. He described both final bids as "robust and very equivalent," especially on strategic development, with the price ultimately deciding the outcome. The government said it weighed not only money but each bidder's industrial plan for growth and long-term sustainability.

Lisbon keeps 50.1% and stays the largest shareholder

The first phase covers up to 49.9% of TAP's capital: 44.9% to Lufthansa and up to 5% set aside for the carrier's more than 9,000 employees, with any unsubscribed shares available to the winning investor. The Portuguese state retains 50.1%. The government valued first-phase proceeds at €1.201 billion, or roughly $1.3 billion, a price that implies an enterprise value of about €2.552 billion for TAP.

The real prize is Lisbon's South Atlantic network

TAP operates more than 90 aircraft to over 90 destinations — 52 in Europe, 16 in Central and South America, 14 in Africa and 11 in North America. Brokerage XTB puts TAP at 11% of routes between Europe and South America, behind IAG's 20% and Air France-KLM's 17% but ahead of Lufthansa's 9%; by another measure it holds 23.1% of Europe-to-Brazil capacity. Analysts describe those Lisbon slots to Brazil, Portuguese-speaking Africa and the United States as the core of the deal.

TAP stays in Star Alliance

TAP is already a Star Alliance member alongside Lufthansa, so the transaction freezes its alliance allegiance; a win for Air France-KLM would have moved it to SkyTeam. Lufthansa Group's portfolio already includes SWISS, Austrian Airlines, Brussels Airlines and, most recently, ITA Airways. TAP's brand, Portuguese headquarters and Lisbon hub are preserved under the proposal.

Fleet commitments: 117 aircraft by 2035, then 130

Infrastructure Minister Miguel Pinto Luz said Lufthansa has committed to growing TAP's fleet from 101 aircraft to 117 by 2035 and to 130 once Lisbon's new airport opens after 2035. Porto would become a second base with eight long-haul aircraft. The plan includes €500 million for a pilot training school at Tancos, an innovation centre in Aveiro and a corporate services centre, on top of Lufthansa Technik's announced investment in Santa Maria da Feira.

The official line: best for the company, best for national interest

"This is the best thing for the future of the company, and is the best way to protect the national interest," Montenegro said, adding that the government is "guaranteeing TAP's growth — growth in its fleet, passengers, destinations and connections." Lufthansa CEO Carsten Spohr called TAP "a strong and profitable airline, our long-standing partner in Star Alliance and internationally successful as the leading carrier on the South Atlantic routes," saying the deal lets the group pursue its internationalisation strategy.

Why sell? Record traffic, razor-thin profit

TAP carried a record 16.7 million passengers in 2025 and generated €4.31 billion in revenue, but net profit was just €4.1 million ($4.6 million) after a €42 million one-off tax adjustment. The picture worsened in 2026: first-half revenue rose 4% to €1.9 billion while the airline posted a net loss of €99.2 million, with its recurring result swinging from a €17.3 million profit to an €83.7 million loss. The second quarter alone brought a €59.3 million net loss against a €38.3 million profit a year earlier. TAP took billions of euros in state aid during the pandemic.

Skeptics question the buyer's own balance sheet

Not everyone is convinced the winner is in shape to deliver. Analyst Strickland told Reuters that Lufthansa is "still struggling financially," that its German mainline is still losing money and that it "has to get its own house in order." Lufthansa has vowed to reach an 8% to 10% operating margin between 2028 and 2030 while simplifying and centralising operations. Lisbon projects a total financial return of about €3.4 billion by 2040 once dividends and Lufthansa shares are counted.

A second phase to buy the rest needs parliament

Lufthansa also submitted an alternative proposal for the remaining 50.1%: €863 million in cash plus a €488 million share swap, €1.351 billion in total, valuing TAP at €2.552 billion. The swap would make Portugal the second-largest shareholder in Lufthansa Group with close to 5%. That stage needs a fresh process and parliamentary approval, and the governing Democratic Alliance lacks the votes, requiring support from the Socialists or Chega.

No completion before 2028

Finance Minister Joaquim Miranda Sarmento has said privatisation will not conclude for 18 to 24 months, in 2028, after European Commission approval. Lufthansa said it is working with the government and Parpública, which manages state holdings, to finalise transaction documentation and expects to sign shortly; completion remains subject to regulatory clearance. Portugal's TAP pilots union welcomed the choice, saying: "We are in good hands."