Lufthansa sees €450m in synergies from TAP deal

Lufthansa expects up to €450 million in synergies from its deal to buy 49.9% of TAP, with most of the gains expected at the Portuguese airline, the German group’s executives said after winning the privatisation. The figure matters because it shows how Lufthansa plans to create value from a minority stake while taking day-to-day control of Portugal’s flag carrier.

Speaking to analysts and investors, Lufthansa CEO Carsten Spohr said TAP is the first profitable airline the group has bought and described it as one of the most modern and youngest fleets in the world. Lufthansa said the synergies would come from network and partnerships, commercial operations, joint procurement, maintenance and cargo.

Chief financial officer Till Streichert said “the majority of the synergies are at TAP level and the smaller part at our level”. He added that the impact on Lufthansa’s results would reflect its stake in TAP, plus the synergies captured on Lufthansa’s side. Streichert also said Lufthansa will handle TAP’s day-to-day management, including fleet, network, commercial policy and current investment, while larger strategic decisions will remain with the board, where the Portuguese state will keep a majority.

Lufthansa beat Air France-KLM in the sale process with a €1.201 billion offer for 49.9% of TAP, including 5% earmarked preferably for employees, and pledged to invest up to €4 billion in fleet expansion. The Portuguese airline is expected to grow to 130 aircraft after 2035.

The German group also said the acquisition would strengthen its position in South America, lifting its market share there from 6% to 20% and putting it alongside IAG, owner of Iberia and British Airways. Lufthansa has also submitted a proposal for a second privatisation phase covering the remaining 50.1% of TAP, valuing the airline at €2.552 billion across both stages.

Originally published at Eco.pt