Preserving the brand, hub in Lisbon airport, routes and management are conditions they accommodate.

“We’ve already contracted judicial and financial consultants. We’re moving in those two fronts as if we were to participate and make an offer, to not begin from zero when the process gets started,” Ben Smith, CEO of Air France-KLM, confirmed in a press conference.

The move’s conditions aren’t yet known, as the reprivatisation decree will only be approved in September, but the CEO admits the group will stick with a minor stake in the company’s capital. “When we enter this transaction, we want to be sure that it strategically aligns with what we aim to do. If the stake’s 20%, 40%, 60%, 80%, it depends on the rights we’d have,” he stated. There’s but one condition: “Commercial direction is key to us.”

“What’s most important is reaching a compromise with the financial community that we’ll hit a margin of 7% to 8% in the medium term. In any transaction, we’d have to have the comfort that this metric is intact,” the group’s CEO underlined.

The interest in the Portuguese company is unquestionable. “From the strategic point of view, we like TAP. We like the additional routes TAP would bring to the group. We’re seeing how the process goes and, when it opens, depending on the conditions, we’ll decide if we enter a formal process,” Ben Smith explained. For now, there isn’t contact with the Government or Portuguese entities beyond the public process.

Minister of Finance, Fernando Medina, assured the reprivatisation diploma will define criteria of “strategic nature to the country” that “privileges TAP’s role as an important driver of economic growth” at his hearing at the parliamentary commission on the TAP investigation, which would pass as “maintaining a Lisbon hub, autonomous company and development project for the company and its growth.”

These are conditions that fit into the operating profile of the franco-Dutch airline. “Air France-KLM was the first large group to be created in Europe and the main elements that were important in the two companies and most stakeholders was assuring that the global brands were kept, that compromises were made over investment, that most operations in Paris and Amsterdam were kept and that investment was given into the routes. I believe we could do the same if we moved forward with TAP,” Ben Smith claimed.

“Celebrating 80 years with the TAP brand, an iconic brand, the network of destinations is very unique, Portugal’s competency is solid. We’re used to any conditions surrounding these three aspects,” the CEO added.

“With the experience we have balancing the force of an airline company with the benefits of belonging to a large group, I think we are the most credible in our capacity to take on compromises of this nature,” Ben Smith admitted. “I think we’re well positioned to be considered for that position or a better one compared to other offers.”

The main two other parties interested in the Portuguese air carrier are the IAG group, owners of British Airways and Iberia, and Lufthansa. The IAG group has also already contracted judicial and communication assessors for the race to TAP, and the CEO, Luis Gallego, was in Lisbon o June 19th in a charm operation in which he met the mayor of Lisbon and the president of the Portugal Tourism Confederation, as ECO reported.

The TAP evaluation process is ongoing, which Parpública granted to the consultor EY and the Finantia Bank. Only once done will the Government advance with the approval of the privatisation decree, which the minister of Finance has scheduled for September.

Air France-KLM shared on Friday a record profit of 604 million euros in the second trimester, after the first three months of the year ending in a loss of 344 million. The whole semester combined records a net profit of 260 million.

The group had revenues of 7.624 billion in the second trimester, an increase of 13.7% compared to the same period last year, driven by the growth in capacity (92% of 2019 levels) and occupancy rate (88%). The number of passengers grew 8.2% to 24.66 million.

Net profits increased by 347 million to 733 million in the trimester. “A lower price of jet fuel and a higher profitability which compensated for inflation allowed the acceleration of the profit growth and a profit margin of 9.6% [also a record],” Air France-KLM highlighted in a press release on their financial results.

The liquid debt lowered from 6.337 billion at the end of December 2022 to 4.9 billion in June, equivalent to 1.2 times the EBITDA of the past year.

Besides the return to profit, the group is making other steps to solidify their capital, which was debilitated from the pandemic period. They reached a deal with Apollo Global Management to borrow 500 million euros for an Engineering and Maintenance team through a perpetual debt with an interest rate of 6.9% in the first three years. There are also negotiations with the American firm for the influx of another 1.5 billion euros into an affiliated company which holds partners’ brand and commercial contracts, including the loyalty program, also through hybrid obligations.