Portugal launches TAP airline privatisation, to sell at least 51%

By Patricia Vicente Rua

LISBON (Reuters) - Portugal's government plans to sell a controlling stake of at least 51% in state-owned airline TAP, it said on Thursday, after the cabinet approved the privatisation process with a view to develop the national aviation sector.

"The content of the decree contemplates objectives for TAP growth, national hub growth, growth and employment within the aviation sector, better utilisation of national airports and pricing," Finance Minister Fernando Medina told reporters.

TAP employees will get another 5%, while the stake to be left in state hands is yet to be determined.

Medina said bidders must be sector players with relevant scale, not investors of a strictly financial nature.

The airline's privatisation has already attracted interest from Lufthansa, Air France-KLM and British Airways owner IAG

IAG CEO Luis Gallego said on Wednesday that TAP would fit right into the group's profile, but the company still needed to see the conditions of the sale.

"The Lufthansa group always seeks to have an active role in consolidating the market. That's why the planned sale of a stake in TAP is interesting for us," a Lufthansa spokesperson told Reuters.

The German airline and TAP would complement each other, especially through TAP's routes to South America, the spokesperson added.

Medina pointed out there was value in TAP's "privileged connections" to the Portuguese-speaking world, including countries such as Brazil, Angola and Mozambique.

"There are interested airlines and their interest is public, which we welcome as a positive sign for the success of this operation," he said.

The government plans to approve the full privatisation dossier with the terms and requirements by year-end and conclude the process by mid-2024, he added.

The carrier, which has been undergoing restructuring under a Brussels-approved bailout, swung to a net profit of 23 million euros ($24.3 million) in the first half from a 202 million loss a year earlier on strong revenue growth, and expects more positive results this year.

The CEO of Ryanair's main DAC airline Eddie Wilson told Reuters on Thursday on the sidelines of the World Aviation Festival in Lisbon that TAP privatisation "is the right thing to do", and that the airline was "a natural fit for IAG".

"And I think they would be more likely to develop Lisbon's hub as well. IAG would have a much better understanding of TAP business than Air France-KLM and Lufthansa, whose natural instinct is always to draw traffic into their hubs," he said.

($1 = 0.9473 euros)

(Additional reporting by Sergio Goncalves and Ilona Wissenbach, writing by Andrei Khalip; Editing by Elaine Hardcastle, Kirsten Donovan and Jan Harvey)