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Wednesday, September 19, 2012

IAG and Lufthansa stay away from TAP sale


IAG and Lufthansa stay away from TAP sale

In a blow for the Portuguese government, both IAG and Lufthansa decided not to bid for TAP SGPS SA. This highlights the challenges the troubled country faces in getting what it sees as being the right price for TAP.

IAG has been dragged down by the reorganisation of Iberia and now British Airways has significant problems with the loss of the Qantas JV and the possible loss of the AA JV. It is time for IAG to concentrate on shoring up its BA operations and reorganise the Iberia operation.

Lufthansa is also preoccupied with managing its current course through these difficult times.

For the Portuguese government time has run out almost. They need to sell TAP by the end of the year under the requirements of its EU bailout program. The airline should carry a value around the $1.6bn mark on a good day and the airline remains attractive because of its access to Brazil.

This leaves potential bidders from the Middle East and Latin America as the preferred options. But, as per the thoughts at IAG on the matter, who right now in this market is in a position to take on an airline that needs significant operational overhaul in a fast contracting European market whilst also satisfying ownership conditions attached to the sale?

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