Would An IAG Buy Of TAP Air Portugal Get EU Commission Approval?

The Portuguese government is once again looking to privatize or partly privatize the country’s national carrier, TAP Air Portugal
. It seems that the International Consolidated Airlines Group or IAG (which includes British Airways and Iberia), is

considering purchasing the Atlantic airline
. However, the European Commission recently refused the group’s proposed takeover of Air Europa
(Spain’s third-largest airline), so will it approve IAG taking over TAP?

Airlines get bought and sold all the time (e.g., the US once had many major airlines, but today only four remain after mergers and bankruptcies). However, it is the responsibility of watchdogs (like the European Commission) to ensure there is always enough competition in the sector. Here are some things to know about IAG’s possible takeover of TAP.

Europe’s Three Major airline groups

While it may appear Europe has many airlines, many are actually consolidated into larger airline groups. A few key players now account for the vast majority of European air traffic. The two largest groups are Air France-KLM (which includes Transavia and Transavia France) and Lufthansa Group
(which includes ITA Airways
, Brussels Airlines, SWISS, Austrian, Discover, and others). Europe now has three major airline groups, namely Lufthansa Group, International Airlines Group (IAG) and Air France-KLM.

“Formed in January 2011, IAG is the parent company of British Airways, Iberia, Vueling, Aer Lingus, LEVEL, IAG Loyalty and IAG Cargo. It is a Spanish registered company with shares trading on the London and Spanish stock exchanges. The corporate head office for IAG is in London, UK.” – IAG

International Consolidated Airlines Group ( IAG
) is the Anglo-Spanish airline holding company formed after the merger of British Airways and Spain’s Iberia (the two nation’s flag carriers). Since its formation in 2011, IAG has expanded by purchasing other airlines (like Spain’s low-cost Vueling in 2012).

International Consolidated Airlines Group airlines:

While IAG is one of the largest airline groups in Europe, it is still much smaller than any of the four major airlines of the United States when

measured by number of aircraft
. The IAG group has over 580 aircraft, while United Airlines has 992 aircraft, Delta Air Lines has 1,009, American Airlines has 997 aircraft, and Southwest Airlines has 767 (all of Southwest’s aircraft belong to the Boeing 737 family). Even the low-cost Irish giant, Ryanair
, has a larger fleet at 609 aircraft (including wet lease).

IAG’s failed Air Europa takeover

IAG has blocked in its attempts to take over more European airlines in the past. For example, in August 2024,

IAG terminated its proposal to take over Spain’s Air Europa
less than two months after it offered remedies to antitrust regulators to secure the approval needed for the deal to go ahead. IAG already has a 20% stake in the airline, but wanted to buy out the other 80% of the company for 400 million Euros. Air Europa is based in Madrid and is a member of the SkyTeam Alliance
.

The European Commission had been skeptical of the takeover, saying the acquisition could reduce competition. According to Reuters, “EU antitrust regulators had been poised to block the deal after IAG declined to offer additional remedies to address their concerns, people with direct knowledge of the matter said.” The European Commission believed the concessions offered by IAG were not enough.

It’s worth noting that Air Europa is a Spanish airline (the third-largest in the country). IAG already owns Spain’s two largest airlines (Iberia and Vueling), so it is not surprising that the commission thought one company having Spain’s three largest airlines would be bad for competition.

IAG’s eyes turn to Portugal’s TAP

IAG cited regulatory and environmental concerns as the reason for abandoning the decision to acquire Air Europa. At the time, Reuters reported that it was speculated that IAG would turn its attention to acquiring Portugal’s TAP after its failure to take over Air Europa. This would potentially be a bigger project than the group’s failed bid to take over Air Europa, as TAP is valued at around $1 billion.

Currently, the Portuguese Government is considering selling a majority or a minority stake in the country’s national carrier, TAP Air Portugal (TAP) (although this is not yet confirmed, and the percentage the government will sell, and the conditions are not yet known).

IAG is now seen as the frontrunner to take over the Portuguese carrier, although Lufthansa may also be interested—even after its ITA acquisition. Aero Time says, “Lufthansa Group has long since had its hat in the ring for any potential stake in TAP that may be made available, analysts are thought to be favoring an IAG-led bid as the most likely to succeed.”

If IAG were to take over TAP, not only would it have another large Iberia-based airline, but it would also have a leading carrier flying to Brazil. Brazil is by far the largest Portuguese-speaking country and was a colony of Portugal long before forming the short-lived United Kingdom of Portugal, Brazil, and the Algarves. The kingdom was disestablished in 1825 as Brazil decided to form its own Empire of Brazil.

Lufthansa Group airlines:

Lufthansa

Austrian Airlines

Brussels Airlines

Discover Airlines

Eurowings

ITA Airways

Swiss International Air Lines

Today, Portugal and Brazil continue to enjoy close cultural and linguistic ties. Aero Time reports, “With Iberia, Vueling, and Barcelona-based LEVEL already bringing significant traffic to the group, the addition of another strong Iberian Peninsula carrier could strengthen IAG’s presence across the Atlantic, particularly in the burgeoning market of Brazil, where traffic numbers to European destinations have been soaring since the end of the pandemic.”

The uncertainty of TAP’s sale

It should be noted that it remains unclear if TAP will be sold at all. The sale has been on and off over the last twelve months amid some measure of political upheaval in Portugal. Portugal’s previous Socialist government approved the privatization (of at least 51%) of the airline in September 2023. However, snap elections were called in March 2024 that torpedoed the plans. The total sale of the airline has caused consternation in Lisbon, and the new government has signaled that it may only sell off a minority stake in the company.

Aero Time notes that if a minority stake under 20% is sold, authorities can avoid the regulatory headache of drawing in European Union competition authorities. The European Commission can delay sales by months or even years.

A three-horse race to take over TAP

The European Commission does approve airline mergers and takeovers (although sometimes it takes a lot of time). For example, in November 2024, it finally approved Lufthansa’s drawn-out and convoluted takeover of ITA Airways. Lufthansa’s takeover of ITA may also spur IAG to look for more takeovers so that it doesn’t become dominated by Europe’s other consolidated airline groups.

As Lufthansa has just taken over Italy’s ITA Airways, the German carrier is thought to be too preoccupied with integrating the new airline to take on yet another acquisition.

“The European Commission has approved, under the EU Merger Regulation, the proposed acquisition of joint control of ITA Airways (‘ITA’) by Deutsche Lufthansa AG (‘Lufthansa’) and the Italian Ministry of Economy and Finance (‘MEF’). The approval is conditional upon full compliance with the remedies offered by Lufthansa and the MEF.” – European Commission

IAG is not alone in its interest in taking over TAP Air Portugal. In October 2024, Reuters reported the Air France-KLM group had expressed interest in acquiring a stake in the airline.

TAP Air Portugal

TAP Air Portugal is headquartered at Lisbon Airport and is a member of Star Alliance. It operates flights to around 90 destinations in 34 countries and has a fleet of exactly 100 aircraft. The bulk of its fleet comprises Airbus aircraft (A319s, A320s, A321s, and A330s), with the remaining 17 aircraft made up of Embraer E190s and E195s. Notably, the airline does not operate any Boeing aircraft.

TAP was founded in 1945 as a government-owned airline and was first privatized in 1953. The airline has been repeatedly privatized and nationalized (the last time it was nationalized was in 2016).

Time will tell for IAG & TAP

Time will tell if the Portuguese government really will sell (in full or in part) its national carrier. It remains to be seen if IAG can provide the best bid to take over TAP Air Portugal and if the European Commission will approve this takeover when it previously poured cold water on IAG’s attempt to take over another carrier on the peninsula. However, IAG is now seen as the frontrunner with the best chance of acquiring TAP.