A person with knowledge of the negotiations said Air France-KLM is prepared to include a path for Portugal to own shares in the airline group if its TAP bid wins. In conversations with the government, the group indicated it could accommodate the state becoming a shareholder as part of a transaction. That setup would hand Portugal a say inside a major European carrier group that is expected to secure control of Scandinavia's SAS AB before year end.
The same source said Air France-KLM would consider moving forward only on a transaction that fits its risk parameters and is financially sound. A spokesperson for the group declined to comment.
Air France-KLM and Lufthansa are both chasing a stake in TAP and have stressed their proposals are not just about headline price. Air France-KLM has highlighted keeping the TAP brand, preserving Lisbon as a hub, and possibly expanding activities in Portugal. Last week, the business newspaper Jornal Economico said Air France-KLM's bid provides a route for Portugal to obtain shares in the group, whereas it added that Lufthansa's plan lacks that element. Lufthansa said its goal remains "to establish a long-term partnership with TAP and Portugal" and said it would not discuss additional details at this stage.
Portugal has entered another round of talks with both airline groups to improve their offers for a minority stake in TAP. The government says both bids are roughly similar in value and that TAP is attractive thanks to its deep links between Europe and Brazil, Latin America and Africa. The privatization blueprint envisions selling up to 49.9% of TAP - of which as much as 44.9% could go to a strategic investor - and allocating up to 5% to employees. A decision is expected in the coming weeks.
Even before a verdict, Air France-KLM is adding service in the market. The group said on Tuesday it will boost winter capacity in Portugal by 12% measured in available seat kilometers. Air France, KLM and low cost unit Transavia plan 24 routes and up to 238 weekly flights, tying five Portuguese airports to cities in France, the Netherlands and Belgium.
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For travelers, that could mean more choice and, potentially, friendlier fares. For your wallet, watch how the winning bidder treats TAP's brand and Lisbon's hub role - that is where long run network value and pricing power will show up.
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