A number of aviation firms, including Lufthansa and Air France-KLM, have also shown interest in the Portuguese carrier but BA owner, IAG, is widely viewed by analysts as the frontrunner.
Airline group IAG is set to be a primary contender to buy a $1 billion stake in state-owned Portuguese carrier TAP, said Reuters.
Analysts and bankers with knowledge of the deal said IAG was the strongest candidate to secure a deal, winning out against competitors Lufthansa and Air France-KLM.
The analysts cited IAG’s successful management of Iberia airline in Madrid, which could create a powerful Southern European hub if merged with TAP operations.
British Airways merged with Iberia in 2011 to form IAG.
IAG is also the parent company of Aer Lingus and Vueling.
In October last year, Portuguese Prime Minister Luis Montenegro said several firms were vying for stakes in TAP, which the state plans to privatise.
One key selling point is the airlines’ status as Europe’s largest provider of flights to Brazil.
TAP also has a strong presence in Africa and North America.
How much will be sold?
The exact terms of the sale are yet to be clarified although a spokesperson at Portugal’s infrastructure ministry has claimed that a deal will take place this year.
Portugal’s previous government approved the privatisation of at least 51% of TAP in late 2023, although plans were halted because of a snap election in early 2024.
Italian newspaper Corriere della Sera reported in September last year that Lufthansa was seeking an initial 19.9% stake in TAP, that “should materialise no earlier than the first quarter of 2025”.
Corriere, citing anonymous Portuguese sources, said the stake could be worth between €180-€200 million.
European aviation executives are pushing for greater consolidation in the industry to improve cost efficiency and compete with global competitors.
Data from analyst Cirium shows that 36 European airlines account for 80% of the region’s capacity, compared with six airlines in the US.
Opposition to a sale
One concern over a sale of TAP is that foreign ownership would dilute the firm’s Portuguese identity.
Antitrust regulations must also be considered, as the sale of a stake over 20% would require a review by the EU competition regulator in Brussels.
IAG last year scrapped plans to acquire Spain’s Air Europa after regulatory demands from Brussels made the deal unattractive for shareholders.
IAG had offered additional concessions to appease the competition regulator, although these weren’t deemed sufficient.
Other consolidation efforts in Europe have been more successful, with the Commission approving Lufthansa’s plans to acquire a minority stake in Italy’s ITA Airways in November.
Euronews reached out to IAG for comment who reiterated the firm’s existing stance.
“IAG will have to study the conditions of privatisation and the intentions of the Portuguese government. Majority or minority stake is just a hypothesis for now. We don’t know the conditions yet, but the deal is interesting,” a spokesperson told Euronews in an email.
They added: “IAG’s interest is to develop TAP further. We would like to be involved with TAP remaining a proudly Portuguese company …IAG helps bring scale to the companies, allowing them to do business together around the world.”
TAP has not yet responded to Euronews’ request for comment.
