MercoPress. South Atlantic News Agency

Portugal’s flag air carrier could end up purchased by Brazilian group

EU biggest carriers shunned TAP auction

Portugal’s auction of state-owned airline TAP SA has been shunned by Europe’s three biggest carriers, boosting prospects for a Latin American takeover of a company analysts say may fetch 500 million Euros.

Air France-KLM Group, Deutsche Lufthansa SA and British Airways (IAG) parent IAG failed to bid by a deadline last week. Among non-binding offers was one from Brazil’s Synergy Group, owner of the Avianca airline brands.

TAP would offer dozens of connections beyond Lisbon for Synergy’s Avianca Brazil unit and provide the first instance of a company in an ex-colony buying the flag-carrier of its former ruler. European airlines attracted by TAP’s South America routes are preoccupied with absorbing earlier purchases, and Lufthansa may also be standing aside because its Star Alliance, which currently includes TAP, features an Avianca sister company.

“TAP’s only value is in its Latin American network,” said Yan Derocles, an aviation analyst at Oddo & Cie in Paris. “Star is weaker there but Avianca Taca is a member, so you can offset this issue through them. And it’s quite a good entry point for Avianca to jump into Europe, even if it’s not in the center.”

Portugal is selling TAP after becoming the third Euro-area country to seek a bailout from the IMF and European Union. Founded in 1945 with two 21-seat Douglas DC- 3s, initial routes included a 12-stop service to Angola and Mozambique. The carrier went private in 1953, with the state retaining a majority stake, before being renationalized in 1975 following the fall of the authoritarian Estado Novo regime.

TAP Chief Executive Officer Fernando Pinto, himself a Brazilian, says that while the economic situation isn’t ideal, the value of 74 weekly flights to both Brazil and Africa and 46 connections in Europe is recognized by the industry. “In that respect the moment is perfect for this privatization,” he said in an interview shown Oct. 3 on business website Dinheiro Vivo.