Air France-KLM is currently studying ways to expand its presence in South America, and with that in mind, it could move forward with the acquisition of TAP Air Portugal.
according to Airlines Weekly, This potential deal is part of a larger wave. In fact, many European airlines are looking to expand beyond the continent.
On an earnings conference call earlier this month, Ben SmithThe CEO of Air France-KLM confirmed his company’s interest in TAP: “TAP occupies a very strong geographical position in the very south of Europe, towards South America, and has a very strong network with Brazil, with 11 non-stop destinations from Lisbon. It is therefore a very interesting project And it can ultimately contribute to our bottom line.”
No formal discussions have been initiated and concluding such an agreement would be complex. The process cannot begin until the Portuguese government officially indicates that the TAP is for sale. However, Portugal has stated publicly that it is likely to initiate a full or partial sale of the company as part of the privatization movement, according to BFM.
The past few years have been somewhat hectic for TAP. While all airlines suffered massive business slowdowns during the pandemic, TAP was on the brink of total collapse. The Portuguese government intervened and nationalized the airline through a valuable aid programme 2.25 million euros.
The European Commission approved this measure, but on the condition that the airline undergo a massive restructuring. This restructuring led to significant staff cuts and the abandonment of some gates at Lisbon Airport, allowing European competitors to capture a larger share of its domestic market.
Now the Portuguese government is looking to get rid of TAP and return it to the private sector. And according to Ben Smith, such a decision can be made in the coming months. If the valuation is good, Ben Smith said Air France-KLM will continue to acquire TAP.
However, other airlines are interested in TAP. The Portuguese company’s privatization plan aroused the interest of airlines Lufthansa and IAG (British Airways).
Air France-KLM expects the number of passengers in 2023 to be approx 95% of the number of passengers in 2019indicating that the sector continues to recover, but has not yet recovered all the business it lost during the pandemic.
However, as international travel patterns return to historical norms in the wake of the pandemic, South America is emerging as a lucrative destination. During the earnings conference call, Air France-KLM reported that South Atlantic travel revenue declined 33% increase Compared to 2019, while seats sold were in 4% decrease.
Currently, KLM Air France holds the 21% of the market share Flights between Europe and South America, according to data from Diio. The merger with TAP will bring this stake to 29%. For now, the airline is relying on a range of partnerships to increase its flights to Latin America.
Air France-KLM is in a strong position to make acquisitions, as the company has repaid all aid it received from the French government. In addition, it expects that strong demand for upscale travel this summer will help it meet its revenue targets sooner than expected.
Translated article from the American magazine Forbes – Author: Chris O’Brien
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