IAG Group considering bid for TAP depending on terms

International Airlines Group (IAG), Iberia’s parent company, is considering bidding in the privatisation of TAP, in parallel with the process of buying Air Europa, if the conditions set by the Portuguese government allow it and if it makes sense for the company.

“We will see what the Portuguese government considers in this process and analyse if it is interesting for IAG,” the executive chairman of the aviation group, Luis Gallego, told Spanish news agency EFE.

Gallego, who is currently attending the 79th general assembly of the International Air Transport Association (IATA), stressed that the group is always looking for consolidation opportunities.

He recalled, for example, that it analysed buying Norwegian, but never put it into effect, while it continues to try for Air Europa, a purchase that depends on the level of requirements that the competition authorities and the European Commission (EC) impose on this operation.

“TAP may be an option, but first we have to see under what conditions it will be privatised and if it makes sense for our network and for our customers,” he said.

He explained that, in principle, the markets in which Air Europa and TAP operate are complementary, as the latter mainly flies to Brazil, where its group has little presence. So “there could be two operations running in parallel”.

On the proximity between Lisbon airport and Madrid-Barajas airport, he commented that the IAG group, being international and with several airlines (Iberia, British Airways, Vueling, Aer Lingus, Iberia Express and Level) works, for example, in the North Atlantic, with a double ‘hub’ structure: Dublin and London.

This type of concern also arose with the Aer Lingus purchase operation, he acknowledged, explaining that at that time he questioned “whether its integration into IAG was going to be bad for the Irish company because BA could somehow devour it”. “And that hasn’t been the case,” he added.

In his opinion, the IAG model is the best as it is less commercially and network integrated and the brands retain their identity, their customers and their revenues.

“We are a single model”, which does not have as much overlap between the group’s different brands, he stressed.

In his opinion, when the conditions of the TAP privatisation process are made public, the three major European groups in the network – IAG, Air France-KLM and Lufthansa – will “at least” see if they have an interest.

Regarding Air Europa, the IAG aviation group has already had first meetings with the European Commission.

The group has a proactive approach on routes where it believes there may be more competition problems, but Gallego did not reveal whether it is similar to the one it put forward in the first attempt to get EC approval for the operation, in the middle of the covid pandemic.

“We are reviewing with the EC what might make sense” because the context in which the agreements with Volotea and World2Fly were presented as a possible solution is now different.

The airlines are coming out of the crisis and demand is high, compared to a context, at that time, in which many companies could have gone out of business, although it is also true that now is the time to pay off the debt generated during covid, he considered, stressing, “It is another approach, but the problem is the same.”

On the outlook for this year, he said that it is not known whether the current traffic growth will be maintained over time.

The second quarter and the third quarter have good prospects, but the last one is unknown, as corporate traffic is still below 2019 levels. In addition, there are many uncertainties, such as the war in Ukraine and the price of fuel, among others.