TAP tax credits aim to attract overseas buyers

In a bid to maximise the price and attractiveness of TAP, 49% of which is to be put up for sale to large airline conglomerations next year, the Portuguese government is to provide €500 million in tax credits.

Although several valuations have been presented to the government, the valuations have yet to be made public for the company which has received around €3.2Bn in funds from the State in recent years reports business daily Negócios.

Moreover, synergies worth €300 million will also be offered to the “many interested parties” wanting to buy a substantial share in the airline.

It was an argument that the US equities fund Lone Star also used to good effect to close the deal for the sale of Novobanco to French banking group BPCE this year.

The sweeteners basically mean that TAP is now officially for sale to Lufthansa, Air France-KLM, and British Airways-Iberia (IAG).

The €300 million in synergies represent just a part of the equation of the company’s value and the price that each one of the airline groups will offer for TAP.

TAP will be able to offer deferred tax assets from 2023 from accumulated losses in 2015, 2021, and 2022 with €447 million that are tax deductible in the future.

The value has oscillated, last year reaching an accumulated balance of €471 million that can be used to offset losses and act as tax offsets.

In the first half of 2025, TAP used €59 million to offset losses the nevertheless stood at €108 million, a negative value partly explained by Easter which fell in the second quarter in financial terms for the airline which nevertheless enjoyed a high amount of liquidity of €1.2Bn which will be attractive to potential investors.

The synergies, tax credits and cashflow mean that TAP has €2Bn or €1.6Bn without the debts.

However, there are factors that are less desirable such as the various lawsuits against the company with the government starting that the future investor will be responsible for future compensations that may have to be paid out.

These potential liabilities could reach several hundred million euros such as the €177 million owed to the Brazilian airline Azul which has not been paid.

And then there is a litigation from TAP crew that could reach €200 to €300 million although TAP has provision of €41 million.

So, what will the eventual buyer be getting for its money? It will get the Lisbon hub which under the terms of the privatisation has to be retained.

It will inherit 99 aircraft with 71% of the Airbus NEOs and 9,170 employees.

It will also have 86 destinations in 31 countries,, 1,250 flights a week (at high season) and 117,906 annual departures. (2024)

TAP transported 16.1 million passengers in 2024 and 95 tonnes of cargo.

It will also hold 100% of Portugália, 100% of TAP Logistics, 100% of UCS, the company’s integrated healthcare unit, 51% of Cateringpor, and 49.9% of SPDH (Portuguese Handling Services).

In terms of profits, TAP made +€54 million in 2024 although in 1Q of 2025 it made a loss of €108 million down to the impact of the Portugália (PGA) pilots’ strike, the shift of Easter to April (impacting ticket sales), increased competition in key markets like Brazil and operational disruptions caused by bad weather.