Air France-KLM Eyes TAP Amid Political Winds
Air France-KLM is reportedly exploring a strategic move to replicate its Scandinavian Airlines (SAS) takeover model with a potential acquisition of TAP Air Portugal. Group CEO Ben Smith indicated at the annual press conference that the plan could materialize “if the conditions are right.” The holding company believes its unique minority government ownership provides a competitive edge over fully private rivals, positioning the group to lead consolidation efforts in the European airline market.
The strategy behind this potential move is modeled on the SAS deal. Air France-KLM currently holds a 19.9% stake in SAS, acquired with an exclusive pathway to a majority position—a strategy that the group considers within its risk tolerance. “We were able to advance on with SAS in 2024 with an exclusive path to a majority. This model enables us to participate in consolidation in a less risky way, without immediately triggering European Commission concerns,” Smith explained. This method not only mitigates risks but also strategically circumvents some of the regulatory hurdles that frequently hamper merger and acquisition activities in Europe.
One of the critical challenges for European airlines, as noted by Smith, is the persistent scrutiny from the European Commission. He lamented that the current competition policies tend to weaken European carriers relative to their global competitors. The CEO stressed the importance of a revised review by the European Commission that would recognize the benefits of having a robust, competitive European airline industry. According to him, a more nuanced approach to merger regulation would help foster a stronger market presence for European airlines.
Smith’s recent visit to Portugal, as part of a French government delegation, underscores the seriousness of the group’s intentions. During his trip, he met with several key stakeholders and discussed the acquisition’s potential framework with local officials. Although TAP Air Portugal has yet to announce formal privatization terms, Smith acknowledged that several priorities appear to be clear. These include preserving the TAP brand, maintaining its extensive network—especially its critical routes to Latin America—and ensuring the stability of its maintenance operations while creating high-quality jobs within Portugal.
Despite the ongoing political uncertainty in Portugal, including the looming prospect of early elections in May, Air France-KLM maintains a cautious approach. The group has emphasized that it will only proceed if the acquisition falls within its “comfort zone” and aligns with its strategic and financial parameters. The planned deal is not being rushed; rather, the company is carefully assessing the evolving political and regulatory landscape to ensure that any move is both beneficial and sustainable in the long term.
A significant advantage for Air France-KLM in the potential TAP deal lies in its shareholding structure. With the French government owning a 27.98% stake and the Dutch government holding 9.13%, the group enjoys a unique position compared to competitors such as IAG and Lufthansa, which are fully private. “We are the only group that has successfully worked with two governments. This alignment of strategies and the experience we bring to the table makes us very attractive to the Portuguese government,” Smith commented, also noting the likelihood of strong political support from France.
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Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com