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News Report: Lufthansa negotiates stake in TAP Air Portugal

News Report: Lufthansa negotiates stake in TAP Air Portugal

Old Feb 26, 20, 5:00 am
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News Report: Lufthansa negotiates stake in TAP Air Portugal

Link to article on aerotime.aero

[PT] Link to referenced article on jornaldenegocios.pt

Originally Posted by aerotime.aero
Lufthansa is reportedly engaged in negotiations to acquire a 45% stake in the airline TAP Air Portugal held by David Neeleman, its main private shareholder. To do so, the German carrier is said to have allied with United Airlines.

The local business newspaper Jornal de Negocios reports that David Neeleman is actively trying to sell his half of Atlantic Gateway, a private consortium he formed five years ago with Humberto Pedrosa. Atlantic Gateway holds a 45% stake into TAP Air Portugal, with the rest being owned at 50% by the Portuguese State and at 5% by the employees. It is unclear if Pedrosa is also participating in the divestment negotiations. In November 2019, the same media already claimed that Neeleman was in talks with Lufthansa, United, Air France-KLM, and IAG – information the businessman denied.

Neeleman, who was also involved in the now-defunct Aigle Azur, and the Portuguese government have had dissensions in the past regarding the management of TAP Air Portugal. The airline reported a €105.6 million loss in 2019, on top of a €118 million loss in 2018. In addition to the poor economic performance, Neeleman’s project for a stock market launch was dismissed. His decision to award €1.17 million in performance bonuses to the managers last year was received badly and the state warned against doing the same in 2020.
If true, that doesn't sound too promising from a consumer standpoint. The eminently reasonable TP TATL fares might be short-lived.
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Old Feb 26, 20, 1:19 pm
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Yup LH cannot afford another Star member to offer really low J fares. Sad.
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Old Feb 27, 20, 2:49 am
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TP, SK and LO consistently offer sub 2000€ TATL business fares yet the LH Group/UA/AC ATI insists to charge 30% more and get away with it. TP is bleeding cash without much external interference.

If a recession hits their leisure market or the super profitable south atlantic business, things will go south very fast. Why the investor is pulling the plug is a mystery. Surely they must have know what they were in for?
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Old Feb 27, 20, 8:09 am
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Originally Posted by oliver2002 View Post
TP, SK and LO consistently offer sub 2000€ TATL business fares yet the LH Group/UA/AC ATI insists to charge 30% more and get away with it. TP is bleeding cash without much external interference.

If a recession hits their leisure market or the super profitable south atlantic business, things will go south very fast. Why the investor is pulling the plug is a mystery. Surely they must have know what they were in for?
TAP had a net profit of €14.1 million in the second half of 2019. With a bit of luck, they might turn the corner.

https://newsroom.aviator.aero/tap-sg...nnual-results/
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Old Feb 27, 20, 1:48 pm
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Originally Posted by TAP-A343 View Post
TAP had a net profit of €14.1 million in the second half of 2019. With a bit of luck, they might turn the corner.

https://newsroom.aviator.aero/tap-sg...nnual-results/
Color me doubtful.
They have the new routes ready to ensure a negative by year end.
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Old Feb 28, 20, 12:14 am
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Hard to say whether the coronavirus will impact growth this year but Lufthansa taking a stake in TAP won't help. We'll have $500 in YQ alone before you know it in addition to higher business fares
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Old Feb 28, 20, 4:09 am
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Originally Posted by GBM.flights View Post
Color me doubtful.
They have the new routes ready to ensure a negative by year end.
LH could stop that nonsense.
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Old Feb 28, 20, 9:24 am
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Originally Posted by worldtraveller73 View Post
Hard to say whether the coronavirus will impact growth this year but Lufthansa taking a stake in TAP won't help. We'll have $500 in YQ alone before you know it in addition to higher business fares
LH and UA want to kill off low-price business class and economy class competition for TATL flights. A substantial LH stake in TAP would almost certainly lead to an outcome of the sort approaching that indicated in the post above.

Given Portugal in recent years has had a stronger economic and fiscal run than much of Europe, the TATL-flying airline industry cartel kingpins wanting to get in on Portugal's growth and developments there isn't all that surprising even if such a consideration to buy an influential stake in TAP weren't about wanting to kill off low-price competition.
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Old Feb 28, 20, 9:32 am
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Originally Posted by oliver2002 View Post
TP, SK and LO consistently offer sub 2000€ TATL business fares yet the LH Group/UA/AC ATI insists to charge 30% more and get away with it. TP is bleeding cash without much external interference.

If a recession hits their leisure market or the super profitable south atlantic business, things will go south very fast. Why the investor is pulling the plug is a mystery. Surely they must have know what they were in for?
Let's just say I wouldn't be surprised if Neeleman has other investments in mind and needs the liquidity before a major downturn hit undermines his positions in ways that will be far harder to recover from if not doing this.
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Old Feb 28, 20, 1:06 pm
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LH's and UA's motivation in buying is clear, as mentioned above.
Neeleman's motivation in selling seems to be related to governmental interference – the minister wants to prevent TP from paying performance bonuses to employees because a loss has been posted.
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Old Feb 29, 20, 6:33 pm
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Is it possible LH is interested because TP is stronger in Latin America and might see some benefit to the connectivity? Having TP also gives them more optimal connections that don't require backtracking to a good chunk of Europe as well.
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Old Mar 1, 20, 11:26 am
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Originally Posted by PsiFighter37 View Post
Is it possible LH is interested because TP is stronger in Latin America and might see some benefit to the connectivity? Having TP also gives them more optimal connections that don't require backtracking to a good chunk of Europe as well.
That's TP's biggest asset, together with part of its African network.
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Old Mar 2, 20, 11:17 pm
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It will be interesting to see how the current medical crisis impacts these plans . . . a move upwards in prices wouldn't likely help demand in the short term.
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Old Mar 4, 20, 5:44 am
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Originally Posted by PsiFighter37 View Post
Is it possible LH is interested because TP is stronger in Latin America and might see some benefit to the connectivity? Having TP also gives them more optimal connections that don't require backtracking to a good chunk of Europe as well.
This might be the business rationale for purchasing.
With Delta taking a stake in LATAM (and moving it from oneworld to SkyTeam) and IAG going through the acquisition of UX (probably to compensate this loss of partnership with LATAM - and despite all the rumors of challenges that deal is facing), LH&UA are seeing in TP an opportunity to compete in the South America region (I believe Portugal and Brazil signed an agreement removing all airspace restrictions between both countries which might be an attractive element as well). The Africa element is probably just a good add-on.

Last edited by FT-Diplomat; Mar 4, 20 at 5:52 am Reason: Clarify I am referring to potential purchasing rationale
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Old Mar 5, 20, 9:04 am
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Ignoring the Covid-related slump in travel, which will either be relatively shortlived or we all have much bigger problems than what happens to a mid-sized airline --- whatever the motivation behind it, LHgroup acquiring TP spells bad news for the travelling public. I wouldn't mind consolidation of smaller EU airlines and have nothing against LH, but a goliath absorbing yet another airline can only lead to less competition.
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