Fleet expansion through 2035 and beyond
The A350 transfers form part of an industrial plan that calls for TAP to reach 117 aircraft by 2035. Further growth to 130 aircraft after 2035 is tied to the opening of Lisbon's new airport. Portugal's government estimates the fleet expansion will require €3 billion to €4 billion in investment.
The government has not specified whether Lufthansa would supply aircraft already in service or use future deliveries. According to ch-aviation, Lufthansa has 31 A350-900s, with another 14 on order, along with orders for 15 A350-1000s.
For TAP, the A350-900 would be both its first A350 variant and its largest aircraft type. Its widebody fleet currently centers on 19 A330-900Ns, with two more due for delivery.
Ownership, funding and control
Lufthansa's initial purchase would cover 44.9% of TAP for €1.025 billion, potentially increasing to 49.9% for up to €1.2 billion. CFO Till Streichert said available group cash would fund the initial acquisition without issuing equity or compromising Lufthansa's commitment to an investment-grade credit rating.
Under the proposed governance arrangements, Portugal would retain a 50.1% holding and appoint five of the nine board members, including the chairman. Lufthansa would choose three members of the four-person executive committee, with the government choosing the fourth. Qualified-majority provisions would give Lufthansa joint control with the state.
A separate, non-binding proposal covers a possible second phase in which Lufthansa would acquire the remaining 50.1%. According to the Portuguese government, that proposal provides an additional €1.351 billion: €863 million in cash and a €488 million share swap representing about 5% of the combined Lufthansa-TAP entity. The proposal implies a total direct valuation of TAP of €2.552 billion and assumes completion of the potential second phase by July 2028.
Lufthansa's financial and network expectations
CEO Carsten Spohr pointed to TAP's existing profitability as a particular attraction and said the acquisition would deliver immediate shareholder value. He said: "This acquisition fits in many, many ways. This is the first time ever that we are buying a profitable airline."
Lufthansa forecasts annual net synergies of up to €450 million, mostly benefiting TAP. The expected gains cover network optimization, commercial cooperation, procurement, maintenance, repair and overhaul, and cargo. The group expects to realize about two-thirds of those synergies within three years.
The group also expects the transaction to increase earnings per share in the first full year after closing and deliver a double-digit return on capital employed.
Spohr said a combined network would give Lufthansa a 20% share of the Europe-Latin America market, matching IAG. Lufthansa currently holds 9% of that market and ranks sixth among operators, he said.
Additional investment in Portugal
The Portuguese government's October 14 announcement also outlined about €300 million in maintenance and engineering investment and 700 jobs in Santa Maria da Feira. Lufthansa's plan includes further investment in an aeronautical and military pilot training school in Tancos.
The government said the transaction, together with future dividends and any appreciation in its Lufthansa Group stake, could enable it to recover the €3.2 billion invested in TAP over the past decade.
