IAG Enters TAP Bid Race as Portugal Courts Strategic Buyers for Airline Stake

International Airlines Group (IAG), the parent company of British Airways, has entered the competition to acquire a minority stake in TAP Air Portugal, joining Air France-KLM and Lufthansa in the bidding process. The Portuguese government is selling up to 49.9% of the state-owned carrier, with 5% reserved for TAP employees. IAG stated that its decentralized model aligns with the government's goal of preserving TAP's Lisbon hub.

Lufthansa was the first to formally express interest in the stake, followed by Air France-KLM and now IAG. The deadline for expressions of interest is Nov. 22, after which qualified bidders will submit non-binding offers. The government will ultimately evaluate proposals based on strategic value, price, and commitments to expand the airline's network.

Portugal's government has made it clear that any bidder must meet a revenue threshold of at least €5 billion in the past three years. IAG, which operates multiple airlines in Portugal, including British Airways and Iberia, has emphasized its existing footprint in the region as a strategic advantage. It sees opportunities to strengthen its network in Brazil and Africa through TAP's routes according to Bloomberg.

Strategic Rationale and Competitive Landscape

IAG's interest is driven by its vision for TAP's integration into its broader European operations. The airline has a presence in Portugal through four major carriers, collectively operating hundreds of weekly flights connecting Lisbon to European and transatlantic destinations. Adding TAP to its portfolio would enhance its reach, particularly in key markets like Brazil and Africa. IAG's decentralized operating model is seen as a fit for maintaining TAP's local identity while scaling its global connectivity according to Bloomberg.

Lufthansa, on the other hand, has positioned itself as a long-term strategic partner. CEO Carsten Spohr emphasized the airline's deep-rooted presence in Portugal and its experience in the Star Alliance network. The company has already acquired a minority stake in ITA Airways earlier this year, suggesting a broader strategy to strengthen its European and transatlantic routes. Lufthansa sees Lisbon as a vital Atlantic hub and aims to expand its network through TAP's existing connections according to Reuters.

Air France-KLM has also outlined its vision for TAP. CEO Ben Smith said the group would maintain the TAP brand and invest in its network while preserving Lisbon as a core hub. The airline emphasized its financial strength and experience in integrating national carriers, citing its partnership with ITA Airways as a precedent. Air France-KLM's proposal highlights its commitment to expanding TAP's fleet and routes, especially to Portuguese-speaking countries in Africa and South America according to Bloomberg.

Implications for Portugal and the Aviation Sector

The sale of TAP's stake is a significant move for Portugal, which aims to reduce its ownership while attracting investment and expertise to modernize the airline. The government has prioritized maintaining Lisbon's position as an international hub and ensuring TAP continues to serve overseas markets. The winning bidder will be expected to support the airline's growth, particularly in expanding its fleet and route network. Bidders will also be evaluated based on their strategic plans, pricing, and commitments to local operations according to Bloomberg.

TAP's financial performance has strengthened in recent years. The airline carried 16 million passengers in 2024, a 1.6% increase from the previous year, and has been profitable since 2022. Its strong connections to Brazil, Africa, and North America make it a unique asset in Europe, where state-owned carriers are increasingly rare. Analysts have highlighted TAP's appeal as a gateway to these markets and its role in connecting Portugal to global tourism flows.

From an investment perspective, the stake sale could enhance Portugal's tourism industry. Improved connectivity, expanded routes, and lower travel costs are expected to benefit both domestic and international visitors. The government has also planned infrastructure improvements at Lisbon's airport to accommodate higher passenger numbers. These developments could make Portugal a more attractive destination for tourists seeking a mix of culture, history, and natural beauty according to Travel and Tour World.

Analyst Perspectives and Next Steps

Analysts are closely watching how the bidding process unfolds. Bernstein analyst Alex Irving suggested that IAG could be a strong contender, partly because it is not currently integrating another airline and has a smaller presence on Europe-Brazil routes compared to its rivals. This could give IAG an edge in the final evaluation. The selection process is expected to be completed by early 2026, with the winning bidder likely to be announced by the end of the year according to Bloomberg.

The Portuguese government has emphasized that any deal must serve the public interest. Bidders will be expected to preserve TAP's core services and maintain its role as a national carrier. The government is also aware of the legal and political sensitivities surrounding the sale, especially in light of past controversies, including the 2015 privatization attempt that was later reversed. Maintaining public trust and ensuring long-term stability for TAP will be key priorities according to Bloomberg.

With the November 22 deadline fast approaching, all three major bidders are finalizing their proposals. The outcome of this process will shape the future of one of Europe's last state-owned airlines and determine the next major player in the continent's aviation consolidation.