Dubai: Portugal’s government has chosen Lufthansa as the successful bidder for flag carrier TAP Air Portugal, selecting the German airline over Air France-KLM in a long-delayed privatisation that could reshape one of Europe’s last major unaligned national carriers.
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Lufthansa has offered €1.025 billion (about Dh4.22 billion) for an initial 44.9 per cent stake. The value could rise to up to €1.2 billion (Dh4.94 billion) if its stake reaches 49.9 per cent, taking into account up to 5 per cent of shares initially offered to TAP employees and a ticking fee.
The transaction still requires approval from the relevant authorities.
South Atlantic
Lufthansa said its planned investment is aimed at supporting TAP’s growth while preserving the Portuguese airline’s national identity and strengthening Portugal’s links with North and Latin America.
TAP is particularly valuable because of its network from Lisbon to Brazil, Portuguese-speaking Africa and the United States. Those routes support Portugal’s tourism industry as well as its wider diaspora, investment and trade links.
“TAP Air Portugal is a strong and profitable airline, our long-standing partner in Star Alliance and internationally successful as a leading carrier on South Atlantic routes,” Carsten Spohr, chairman and CEO of Deutsche Lufthansa, said.
“It is known for its outstanding employees and has a compelling business model.”
Spohr said the Portuguese government’s decision would allow TAP to continue its growth while helping Lufthansa strengthen its position in the South Atlantic.
Bigger network
The acquisition would give Lufthansa another important European airline and expand its reach into markets where the group has had less access.
“This will give them an additional hub, albeit in a sphere of influence where they've lacked reach currently,” aviation analyst John Strickland told Reuters.
Lufthansa already owns or controls airlines including Austrian Airlines, SWISS and ITA Airways, giving the group a broad network across Europe.
For Gulf travellers, TAP's role as a European gateway is particularly relevant for passengers connecting onwards to Portugal, Brazil and other destinations across the Atlantic.
Lufthansa Group said its airlines currently operate 353 weekly flights to six destinations in Portugal, with capacity 75 per cent above 2019 levels.
The group has operated in Portugal for more than 70 years and currently employs more than 500 people in the country.
Fleet growth
Portugal is also looking for a strategic investor capable of expanding TAP beyond its Lisbon hub and strengthening its presence across the country's wider airport network, including Porto, Faro, the Azores and Madeira.
Infrastructure Minister Miguel Pinto Luz said Lufthansa had committed to increasing TAP's fleet to 117 aircraft by 2035 and 130 aircraft after 2035, when Lisbon's new airport is expected to be operational.
As of June, TAP operated 101 aircraft serving 93 destinations worldwide.
Its network included 52 destinations in Europe, 16 in South and Central America, 14 in Africa and 11 in North America.
TAP carried a record 8.2 million passengers in the first half of 2026, up 4.2 per cent from a year earlier, while operating revenue increased 4.3 per cent.
Why Lufthansa?
The Portuguese government said its decision was based not only on the purchase price but also on each bidder's industrial plan for TAP, including its strategy for growth and long-term sustainability.
Prime Minister Luis Montenegro said Lufthansa's winning offer was 16 per cent higher than that of Air France-KLM.
TAP chief executive Luis Rodrigues, speaking before the announcement, said joining a larger group could give the airline access to greater resources.
The deal is also part of a broader consolidation of Europe's airline industry, as national carriers increasingly look to larger groups for capital, network reach and resilience.
That trend has become more significant as airlines face higher costs and disruption linked to the war in Iran and soaring jet fuel prices.
Financial test
The deal nevertheless comes as Lufthansa itself faces financial pressure.
Strickland told Reuters that Lufthansa would need to manage the investment in TAP while dealing with its own turnaround.
“Lufthansa is still struggling financially,” he said. “Lufthansa Deutsche Airlines, as the largest part of the group, is still losing money. It has to get its own house in order.”
Lufthansa has targeted an operating profit margin of 8 per cent to 10 per cent between 2028 and 2030 and has been working to simplify and centralise its operations.
The group is also still working through the turnaround of Italy's ITA Airways, another major European airline investment.
What's next?
Lufthansa said it is now working with the Portuguese government and Parpública to finalise the transaction documents.
The agreements are expected to be completed and signed shortly, although the acquisition remains subject to regulatory approval.
Lufthansa said its strategy is not simply to acquire a stake in TAP but to support the airline's growth while maintaining its Portuguese identity.
The group also pointed to its expanding presence in Portugal, including a new Lufthansa Technik facility in Santa Maria da Feira near Porto. Construction began in June and the company expects the project to help increase its direct workforce in Portugal to more than 1,000 by 2030.