Portugal Picks Lufthansa Over Air France-KLM for Up to 49.9% of TAP Air Portugal
Portugal's government has chosen Lufthansa Group as the buyer of a stake of up to 49.9% in TAP Air Portugal, ending a privatisation contest with Air France-KLM that ran for more than a year. The decision was announced on 14 October 2026 after a cabinet meeting. The price attached to the first phase is €1.201 billion, and the government says it will keep 50.1% of the airline for now.
The announcement settles the question of who will be TAP's industrial partner, but it does not close the sale. Contracts have still to be finalised and signed, and the European Commission must clear the transaction. The finance minister has indicated that this process could stretch into 2028.
What the government decided
According to Reuters, Prime Minister Luís Montenegro said the winning bid was 16% above Air France-KLM's offer, and that the government weighed each bidder's industrial plan, including growth and long-term sustainability, alongside price. Both airlines had submitted improved final bids in late September. Portuguese outlet ECO News reported that both binding offers went to state holding company Parpública on 30 September.
Traicy, citing the government's presentation, reported that evaluation covered technical proposals, contract terms and financial offers, and that the two bids were closely matched on strategy and terms. It said Lufthansa won on a stronger financial offer with less uncertainty.
How the €1.201 billion is built
ECO News set out the structure of the winning offer in detail:
- €1.025 billion for 44.9% of TAP's capital.
- €118 million for a further 5% block reserved for TAP employees, priced at the same level as the main stake.
- A component of €58 million tied to the sale of Cateringpor and SPdH, and a performance-linked adjustment.
- An implied valuation of TAP of €2.407 billion.
Reuters and Traicy both said any employee shares not taken up would end up with the buyer, which is how the headline stake reaches 49.9%. Lufthansa itself, in the statement quoted by ECO News, described its immediate purchase as 44.9%.
Air France-KLM's rival bid was €1.038 billion, according to ECO News, with a possible extra €100 million payable if TAP met EBITDA and net debt targets by 2028. ECO reported that the uncertainty attached to that contingent payment weighed on the government's choice. A separate ECO report from 13 October said Lufthansa's offer was entirely in cash, while Air France-KLM had been reported to have considered paying part of its price in shares. Analyst Arthur Kuntz of AlphaValue was cited as saying a share swap had never really been on the table for Lufthansa.
The two figures are not strictly like-for-like. The Lufthansa number of €1.201 billion covers the 44.9% stake, the employee block and other components described above, and the Air France-KLM number excludes its possible €100 million earn-out. The sources read for this article do not break the rival bid down further.
The second phase: a path to control
Both bidders also tabled proposals for the remaining capital. According to Traicy and ECO News, Lufthansa's phase-two offer is valued at €1.351 billion. It consists of €863 million in cash plus a share swap equal to a 5% stake in the enlarged Lufthansa-TAP group, valued at €488 million. That swap would make the Portuguese state the second-largest shareholder in the combined company. Traicy said the cash portion assumes phase two closes by July 2028.
ECO News gave the total valuation across both phases as €2.552 billion. The sources do not explain the difference between that figure and the €2.407 billion implied by the first-phase terms, so the two should be read as describing different scopes of the deal.
Lufthansa said in its statement, as reported by ECO News, that a majority stake "generates additional benefits for all parties involved." Montenegro said the government will start a process to sell all of TAP by 2028. ECO also reported that the second-phase proposal was left out of this stage of the decision. Traicy said the procedures for it are expected to begin shortly.
What Lufthansa has promised
The commitments attached to the winning bid are extensive, and they matter because the government said price was not the only criterion.
Fleet and investment. Lufthansa has committed to growing TAP's fleet from 101 aircraft as of June to 117 by 2035, and to 130 after that, once Lisbon's new airport is expected to be operational, according to Reuters. ECO News reported that the investment required could reach €4 billion, while Traicy gave a range of €3 billion to €4 billion. Up to eight Airbus A350-900s could move from Lufthansa's fleet to TAP from 2030, and the regional subsidiary Portugália's fleet would be modernised, ECO reported.
Brand, hub and bases. Traicy listed commitments to keep the TAP brand and headquarters in Portugal, to strengthen Lisbon as a hub, to maintain routes to the Portuguese islands and to base eight aircraft at Porto. ECO News described Porto as remaining a second base with eight long-haul aircraft.
Alliances. TAP would stay in Star Alliance, ECO reported, with the possibility of a larger joint venture with United Airlines and Air Canada on North Atlantic routes.
Latin America. Lufthansa framed TAP as part of its South Atlantic strategy, with the stake supporting links between Portugal and both North and Latin America. According to the government's presentation as reported by ECO, integrating TAP would lift Lufthansa's South American market share from 9% to 20%. ECO also said TAP would become Lufthansa's platform for Brazil and other Portuguese-speaking markets.
Maintenance and industry. TAP's maintenance and engineering unit would join the Lufthansa Technik network, with higher expected volumes, manufacturer licences and centres of excellence. A €300 million facility in Santa Maria da Feira, for 700 workers, is already under construction and due for completion within two years, ECO reported. Lufthansa also committed to a travel-technology and start-up hub in Aveiro, and to a €500 million civil and military aviation school at Tancos, which ECO said would create 200 jobs and be completed in 2029 or 2030.
The government said the combined initiatives could support 5,000 jobs in Portugal, per ECO News. That figure is the government's own estimate and was not independently verified in the sources read.
Why TAP was worth contesting
Reuters said TAP's main appeal is its Lisbon slots to Brazil, Portuguese-speaking Africa and the United States. The airline carried a record 8.2 million passengers in the first half of 2026, up 4.2% from a year earlier, with operating revenue up 4.3%, according to the same report. RTTNews put the network at 93 destinations worldwide and noted that TAP joins a Lufthansa Group that already includes SWISS, Austrian Airlines and ITA Airways.
Reuters also cited an aviation analyst who cautioned that Lufthansa's own financial difficulties, particularly at Lufthansa Deutsche Airlines, could challenge a turnaround at TAP. The same report noted that Lufthansa targets an operating profit margin of 8% to 10% between 2028 and 2030. Analysts quoted by Reuters described the deal as part of a broader consolidation among European airlines that they expect to accelerate as jet fuel prices rise.
Air France-KLM's response
Air France-KLM said it was disappointed by the outcome, according to Reuters. The group said it would continue to connect Portugal to the world through its hubs and bases and would assess options to grow its presence in Portugal and South America.
What happens next
Lufthansa said it is working with the government and Parpública to finalise the transaction documents and expects to sign soon, as reported by ECO News. Signing is a step, not the end: the deal needs European Commission merger clearance. Finance Minister Joaquim Miranda Sarmento said the EU process could take 18 to 24 months, which ECO reported as pointing to a closing in 2028. An earlier ECO report put the same expectation another way, saying Portugal does not expect any effect on public debt from the sale before 2028.
Several points remain open. The reporting reviewed here does not publish the full contract terms, the details of the performance-linked adjustment in Lufthansa's price, or how competition authorities will treat overlaps between TAP and the Lufthansa Group's existing South Atlantic services. Nor do the sources explain how employee take-up of the reserved 5% will be handled beyond the fallback that the buyer takes any unsubscribed shares.
For passengers, nothing changes immediately. TAP continues to operate as an independent airline and a Star Alliance member, and the commitments on brand, headquarters and the Porto base are promises in a bid, not yet binding contract terms.
Sources
- ECO News (econews.pt), "Lufthansa wins bid for 49.9% of TAP", 14 October 2026
- ECO News, "Lufthansa pledges bigger TAP fleet, Tancos aviation hub", 14 October 2026
- ECO News, "Lufthansa signals push for full control of TAP", 14 October 2026
- ECO News, "Lufthansa bids cash only for TAP stake sale", 13 October 2026
- Reuters, "Lufthansa wins race for EUR1.2 billion stake in Portuguese carrier TAP", 14 October 2026 (read via Euronext Live)
- Traicy, "Portugal Selects Lufthansa Group to Acquire Up to 49.9% Stake in TAP Air Portugal", 14 October 2026
- RTTNews, "Portugal Picks Lufthansa To Buy Up To 49.9% Of TAP Air Portugal For EUR 1.2 Billion", 14 October 2026