Lufthansa remains silent on alleged talks over TAP stake

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Lufthansa (LH, Frankfurt Int’l) declined to comment on Portuguese media reports, citing Portuguese President Marcelo Rebelo de Sousa that talks have resumed over a possible capital injection by the German carrier into TAP Air Portugal (TP , Lisbon) in difficulty.

“Please understand that we are not commenting on media speculation,” a Lufthansa spokesperson told ch-aviation without denying the allegations.

Speaking to reporters following a meeting in Luanda with Angolan President João Lourenço, De Sousa reportedly suggested that talks resumed after being put on hold by the COVID-19 pandemic. He said the issue had been discussed for a long time and that a possible Lufthansa investment in TAP was underway but halted by the pandemic. “I think the issue was closed on the eve of the pandemic. If there hadn’t been a pandemic, there would most likely have been a positive development,” he said, adding that COVID- 19 had resulted in a change of plans. “As you know, on this issue the European Commission has a role to play and the pandemic has frozen it. But the reality was already well advanced before the pandemic”, he was quoted by the press agency Portuguese Lusa.

Portuguese media reported that the government wanted Lufthansa to become a shareholder in TAP, as this could help Brussels give the green light to its 3.2 billion euros ($ 3.7 billion) aid plans for the airline restructuring.

On July 16, 2021, the European Commission (EC) re-approved the emergency rescue loan of € 1.2 billion ($ 1.4 billion) granted by Portugal to TAP last year, but has decided to check whether the new airline restructuring aid plan complies with the Union Rules.

Lusa said De Sousa downplayed the EC’s investigation as a normal precautionary measure taken by the Commission in cases of state aid for corporate restructuring.

Portugal’s ECO said the reassessment would take at least three months during which the government would have the opportunity to argue its case in Brussels. He said one of the government’s main tactics was to secure private investment in TAP in order to convince the Commission that the airline would not be dependent on state aid in the future.

As previously reported, the government reportedly informed the EC late last year that it wanted Lufthansa to become a strategic investor in TAP. He reportedly sent a similar message to Lufthansa shareholders. Former 22.5% TAP shareholder David Neeleman had also been in talks with Lufthansa and its Star Alliance partner United Airlines before the start of COVID, but Lufthansa never made an offer.

One potential obstacle to such a deal would be that Lufthansa was also forced to accept 9 billion euros ($ 10.1 billion) in aid from the German state and its other domestic markets. According to EU rules, until Lufthansa repays 75% of the recapitalization, it cannot acquire more than 10% from another company.

The Lufthansa Group said earlier this month it had cash and cash equivalents of 10.6 billion euros ($ 12.6 billion) as of March 31, 2021, including funds not called bailouts from Germany, Switzerland, Austria and Belgium. By that time, he had used around 2.5 billion euros (US $ 3 billion) of the 9 billion euros in aid. On July 7, the Group had further strengthened its liquidity by raising 1 billion euros ($ 1.19 billion) in a sale of corporate bonds and was preparing for a capital increase of between 3 and 5 , 5 billion euros (3.5 to 6.5 billion dollars). . The net proceeds of the capital increase would notably contribute to the repayment of state aid, he said, but gave no date or size for the measure.

The TAP group recorded losses of 1.42 billion euros ($ 1.6 billion) in 2020.



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