Sale of TAP could be delayed by six months to a year
The fall of the government this week and the forthcoming elections in May could set back the privatization of Portugal’s national carrier TAP by anything between six months and a year.
This is because the decree law for the privatisation that should have been ready for publication this month will now be temporarily suspended since the current government has now entered a caretaking period until the elections in May.
Portuguese law lays down that an interim government may only limit itself to a caretaking capacity and it will take some time for the new government to decide when and how it will proceed with the privatisation plan.
The Portuguese airline selloff has attracted the interest of the three main European airline groups: International Airlines Group (IAG), Lufthansa, and Air France-KLM.
IAG, which controls Iberia and British Airways, has expressed an interest in acquiring control of TAP to strengthen its position on transatlantic routes.
Lufthansa and Air France-KLM are also trying to gain a foothold in Latin America, which has generated direct competition between the groups.
The Portuguese State has imposed conditions on potential buyers, including the maintenance of the hub in Lisbon and the continuity of strategic routes with Brazil and North America.
In the event that no bidder accepts these requirements, the Government would maintain control of TAP, an option preferred by the PS Socialist Party and the other left-wing parties Bloco de Esquerda and the Communist Party PCP, which propose a partial sale in which the State maintains the majority shareholding interest.
The current government left the process in the hands of Parpública, the state holding company responsible for the management of public companies, which had already selected Bank of America as financial advisor and Morais Leitão for legal advice.
The Minister of the Presidency, António Leitão Amaro, has acknowledged that the sale of TAP is a decision that requires a government with full powers.
While the interim government may continue with preparations, the final decision will depend on the new government. Although PSD and PS agreed on the need to sell the company, they could not agree on the percentage of the divestment.
Earlier this month, the French president, Emmanuel Macron, in an official two-day visit to Portugal a week ago suggested that the “marriage” (the word he used) between TAP and Air France/KLM would be “a happy ending” to a process that had continued to drag on.
The current political crisis gained traction while Macron was traveling from Lisbon to Porto where he again spoke about the ‘link’ between the two companies.
