Market Data 
By Joanna Plucinska, Sergio Goncalves and Andres Gonzalez
DUBLIN (Reuters) – British Airways-owner IAG is likely to be a frontrunner to buy a stake in Portuguese carrier TAP, valued at about $1 billion, bankers and analysts said, marking the next phase in consolidation of the European market.
Aviation executives highlighted at the Airline Economics finance conference in Dublin last week the need for consolidation in the industry as it battles high costs and a price-conscious consumer base. They said it would also help carriers compete more effectively with U.S., Gulf and Asian rivals.
Europe’s major airline executives are hoping the Portuguese government will start formal talks soon on the sale of either a minority or majority stake in its national carrier.
A spokesperson at Portugal’s infrastructure ministry, which is overseeing the sale, said: “The government is still listening, assessing market interest… but the sale will take place this year.”
Data from airline industry analyst Cirium presented in Dublin showed that 36 European airlines account for 80% of the continent’s capacity, compared with six airlines in the United States.
The region’s big carriers IAG, Air France-KLM and Lufthansa have expressed interest in the possible purchase of TAP, hoping to access the lucrative South American market and build a new hub for Southern Europe.
A banker with knowledge of the deal said that IAG, which owns Iberia and Aer Lingus, was the most keen and likely the strongest candidate to strike a deal with TAP, with analysts pointing to its success with Iberia in Madrid as a good starting point for a Southern European multihub base.
Lufthansa has also spent time lobbying government officials in Lisbon as it looks to expand its presence in southern Europe after buying a stake in Italy’s ITA Airways.
Lufthansa declined to comment.
Jonathan Sullivan, chief corporate development officer at IAG, told journalists in Dublin the group was not ruling out taking a minority stake that would also allow for “a path for a majority stake,” Portuguese news site Observador reported last week.
When asked by Reuters about IAG’s interest in the TAP sale, IAG said Sullivan also emphasised that TAP would stay “a proudly Portuguese company, just as Aer Lingus is proudly Irish and British Airways is proudly British.”
Analysts said this could prove to be an important element in IAG’s potential success – retaining the national identity of the carrier is important to Portuguese government officials.
British Airways’ merger with Iberia in 2011 to form IAG has been seen as largely preserving the carrier’s Spanish identity.
POLITICAL TURMOIL
Political upheaval in Portugal and regulatory scrutiny have raised concerns that talks could face more delays.
“The timeline does seem to be slipping a little again and it may end up happening in early 2026,” said Goodbody aviation analyst Dudley Shanley.
A previous Socialist administration in Portugal in September 2023 approved the privatisation of at least 51% of TAP, but the sale did not go ahead as the country held a snap election in March 2024.
Portugal’s Prime Minister Luis Montenegro, who had previously insisted on a total privatisation of TAP, signalled in October that a partial sale was a possibility, after the opposition expressed worries about a total sale.
If a minority stake of just under 20% is sold, the Portuguese authorities would avoid an assessment of the transaction by the EU competition regulator in Brussels.
Airline executives point to Portuguese government indecision and EU regulators as key blocking points in further airline consolidation.
The last major deal – the sale of a stake in Italy’s carrier ITA to Lufthansa – took more than a year of wrangling with Brussels over concessions. In the end Lufthansa had to give up slots at major airports like Milan’s Linate to get approval.
Also, the European Commission’s concerns eventually prompted IAG to walk away from its takeover of Air Europa, in which it has a 20% stake.
IAG’s ownership of Iberia could raise similar competition challenges in the TAP bidding process, analysts said. That could force it to offer big concessions as Lufthansa did in its ITA deal.
