Government picks Lufthansa over Air France-KLM

Portugal's government selected Lufthansa on Wednesday, 14 October 2026, as the partner for the partial privatisation of TAP Air Portugal, the state-owned flag carrier. Prime Minister Luís Montenegro announced the decision after a Council of Ministers meeting. Lufthansa's proposal brings 1,201 million euros for up to 49.9% of the company in this first phase. Air France-KLM was the only other group left in the final round, after both submitted improved binding offers on 30 September. The government had extended the talks to clarify the differences between the proposals. Montenegro said the winning bid implies a total valuation of 2,552 million euros for TAP.

Deal terms

The Lufthansa bid includes a reference price of 1,025 million euros for 44.9% of TAP, plus 58 million euros in timing adjustments linked to a ticketing fee. Five percent of the capital is reserved for the company's more than 9,000 employees, and the state keeps at least 50.1%, so it remains the majority owner. Montenegro said Lufthansa's offer exceeded Air France-KLM's by 163 million euros, or 16%. A second phase, due by 2028, could swap the remaining capital for a stake in Lufthansa's holding company. For that phase Lufthansa offered a further 488 million euros, and the share exchange could make the Portuguese state the second-largest shareholder in the airline. Montenegro also recalled that TAP was valued between 700 and 1,700 million euros in 2023, the year the privatisation was decided, and no higher than 350 million euros in 2024. The deal still needs approval from European Union regulators.

With this decision, the government has successfully completed the first phase of the privatisation of the airline.

Commitments and fleet

Infrastructure Minister Miguel Pinto Luz said the proposal meets the government's strategic conditions, including the Lisbon hub, connectivity with the islands and Portuguese-speaking markets, the TAP brand and the company's labour agreements. Lufthansa has committed to growing TAP's fleet to 117 aircraft by 2035 and to 130 after that, when Lisbon's new airport is expected to be operational. It will also transfer up to eight Airbus A350-900 aircraft by 2030 and modernise the Portugália fleet. TAP's maintenance operations would move into Lufthansa Technik, with 350 million euros invested in the centre at Santa Maria da Feira and more than 700 jobs created. Pinto Luz said Lufthansa's share of the Latin American market would rise from 9% today to 20% with TAP, a gain he linked to a planned joint venture with United Airlines and Air Canada.

As of June, TAP operated 101 aircraft serving 93 destinations. The airline carried 8.2 million passengers in the first half of 2026, up 4.2% on the same period a year earlier.

Reactions and next steps

Finance Minister Joaquim Miranda Sarmento called the deal a "reforma estrutural", arguing that its effects would extend beyond the airline to aircraft maintenance and planned investment at Tancos. TAP CEO Luis Rodrigues, speaking at the World Aviation Festival in Lisbon before the announcement, said joining a larger group would let the carrier access more resources at better value. Air France-KLM said it had taken note of the decision and valued the process.

Although the Group is naturally disappointed at not having been selected, it appreciates the constructive dialogue maintained throughout the process.

The group said it would keep connecting Portugal to the world through its hubs and bases, and would assess all options to grow its presence in Portugal and South America. The Lufthansa deal is expected to close in early 2028, subject to regulatory approval.