One of the companies with which the state is hoping to generate the largest profits, airline TAP is one of the crown jewels in the privatisation programme and there are already several potential contenders interested in entering the race for the flag carrier.

Airlines such as Germany’s Lufthansa, Qatar Airways, IAG – a holding that includes British Airways and Iberia –, Brazilian TAM, and Turkish Airlines have all expressed interest at one stage or another, in the acquisition of TAP.
At this stage, the main contenders are IAG, Avianca, Lufthansa, and Turkish Airlines, all of which are cautiously assessing the company’s potential. These firms are mainly drawn to TAP due to its routes to Latin America and Africa, forming an important hub that increases the state’s bargaining position in the sale.

The cabinet approved on 2 August TAP’s privatisation model, taking into account the “close ties it holds to the country” which must be “maintained”, and was thus designed with the purpose of it retaining the position as Portugal’s flag carrier.

According to the statement released, the privatisation will be carried out in two stages: the first will include an increase of TAP’s share capital and the direct sale of the Portuguese state’s stake in the company to investors interested in entering the company; the second stage will involve a “public offering of shares representative of the social capital” of the airline, whose acquisition will be exclusive for TAP workers.

According to the statement, this privatisation strategy follows the objective of “potentiating the maximisation of TAP’s value”.

However, the delay in making the company’s specifications public, which should have been available from 30 July, will undoubtedly bring about the postponement of the date originally set for the contenders to present their bids – 7 November –, according to financial Diário Económico.

Jornal de Negócios, another financial daily, however, reported that the “Information Memorandum”, a “portrait” of the company’s financial situation, should be ready in early August.

The Portuguese government wants to have TAP’s privatisation process concluded until the end of 2012, like that of ANA, and include its proceeds in the 2013 accounts, according to the cabinet’s Letter of Intent dated from last July.

TAP’s pivotal role in guaranteeing the connection with markets which are essential for Portugal, such as Africa and Latin America, is one of the company’s greatest assets, but these are also crucial for the country – and the company’s privatisation can place this position at risk, if the business strategy of the buying company fails to view TAP as an important airline in these transcontinental routes.

João Cravinho, a former minister for public works, told PDV that the loss of the state’s control over the company could gain form in changes to TAP’s role in the transcontinental hub: “The only way of accomplishing this is [for the state] to retain a stake” capable of “influencing, or even oppose an eventual transformation of TAP into a mere regional company”.

However, a significant presence of the state in the airline’s capital would decrease the estimated proceeds, since the presence of a “sovereign shareholder” would remove some of the appeal for potential contenders. In the present context of very limited liquidity, it is presumed the government should reject the hypothesis of retaining a preponderant position in TAP, according to Cravinho.