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PanAm_DC10
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Iberia Might Be Interested In Buying Tap?

Tue Feb 21, 2006 9:45 pm

I'll need the help of some local's here but according to a report carried today in Dairio Econimico Iberia's Chief Operating Officer, Angel Mullor, is quoted as saying IB would have an interest in the upcoming Privatisation of TAP.

By Jeffrey T. Lewis
Feb. 21 (Bloomberg) -- Iberia Lineas Aereas de Espana SA might be interested in buying a stake in TAP SGPS SA, Portugal's biggest airline, Diario Economico reported, citing Iberia Chief Operating Officer Angel Mullor.

The Portuguese government plans to sell part of state-owned TAP in 2007, Finance Minister Fernando Teixeira dos Santos said on Feb. 16. Iberia wouldn't be interested in a sale that leaves TAP controlled by the government, the newspaper said. ``We'll study the operation if it's a real privatization, without limits,'' the newspaper reported Mullor as saying.


[END - For fair use excerpt purpose]

http://www.bloomberg.com

I would be interested if any further details of TAP's Privatisation are available and as to whether Iberia would be able to buy a controlling stake as Mr Mullor's statement seems to imply.

Who would benefit the most if this were to go ahead or is this just a preliminary report which does not carry much substance?

Thanks and regards

PanAm_DC10
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hardiwv
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RE: Iberia Might Be Interested In Buying Tap?

Tue Feb 21, 2006 9:50 pm

Quoting PanAm_DC10 (Thread starter):
Iberia's Chief Operating Officer, Angel Mullor, is quoted as saying IB would have an interest in the upcoming Privatisation of TAP.

Very interesting news. I think both airlines have a lot o potential for synergies, especially because of IB incursion in Latin America and TP presence in Brazil (which is 1/4 of its business). What would happen to TP membership in *A and codeshare agreement with RG?

Rgs,
 
BDKLEZ
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RE: Iberia Might Be Interested In Buying Tap?

Tue Feb 21, 2006 10:02 pm

I'm not overly familiar with the home/domestic network of either carrier. I understand the potential of the Brazil/LatAm operation, however, is there not a risk on home turf that they could be accused of a potential monopolisation ploy within the Iberian peninsula if a merger/take-over would be officially proposed?
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boeingbus
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RE: Iberia Might Be Interested In Buying Tap?

Tue Feb 21, 2006 10:44 pm

I believe this is the worst that can happen to Portugal and its airports. I'm hoping that the Portuguese government and its citizens would not allow this to happen as it would be anti-competitive. As this would justify some form of consolidation of fights to the bigger MAD. LIS would be left out in the dust as a feeder airport to MAD, just like how Barcelona is today and how CDG dominates most airports in France. Not a good thing for Portuguese interests.

 thumbsdown  IMO, Thumbs down IB!  thumbsdown 
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hardiwv
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RE: Iberia Might Be Interested In Buying Tap?

Tue Feb 21, 2006 10:56 pm

Quoting BoeingBus (Reply 3):
I believe this is the worst that can happen to Portugal and its airports. I'm hoping that the Portuguese government and its citizens would not allow this to happen as it would be anti-competitive. As this would justify some form of consolidation of fights to the bigger MAD. LIS would be left out in the dust as a feeder airport to MAD, just like how Barcelona is today and how CDG dominates most airports in France. Not a good thing for Portuguese interests.

There are ways Portugal could safeguard its interest, the same way KLM/AF merger did not mean the demise of AMS as a major hub, and LH/LX merged mantained ZRH hub for some operations.

In the long run, it is in the best interest of IB and (mainly) TP to join forces to become a larger and more prominent airline. LIS would continue the hub for Brazilian operations (apart from GRU and maybe GIG which deserves a dual flight from both MAD and LIS) while MAD would dominate the rest of Latin America.

Consolidation is a matter of survival for any airline, and IB-TP would form an almost perfect match. We could go even further and envisaged a merger of IB and TP which would afterwards merged with BA.

Rgs,
 
boeingbus
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RE: Iberia Might Be Interested In Buying Tap?

Tue Feb 21, 2006 11:02 pm

TP grew 40% in the last 5 years. They are doing just fine and no consolidation is needed. Leave them alone - small carrier for a small country.
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columbia107
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RE: Iberia Might Be Interested In Buying Tap?

Tue Feb 21, 2006 11:25 pm

Quoting BoeingBus (Reply 5):
TP grew 40% in the last 5 years. They are doing just fine and no consolidation is needed. Leave them alone - small carrier for a small country.

I could not agree more.

However there are precedents such as in the banking industry.
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WINGS
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RE: Iberia Might Be Interested In Buying Tap?

Wed Feb 22, 2006 12:14 am

Hi PanAm, I have also been following these latest developments in relation to Taps future privitisation plans. I dont particularly see either Tap or even Portugal benefiting from Iberia taking a stake into Tap. I would rather see LH taking a stake into Tap as they belong to a stronger group and while at the same maintaing its links with Star Alliance.

As for Portugal generating a stronger airline to combate outside threats, I would lean towards a full merger between Tap, Portugalia (PGA), and SATA:

Quoting Hardiwv (Reply 1):

Very interesting news. I think both airlines have a lot o potential for synergies, especially because of IB incursion in Latin America and TP presence in Brazil (which is 1/4 of its business). What would happen to TP membership in *A and codeshare agreement with RG?

It might look like a good business move by some but a posible future participation by Iberia into Tap might creat an monopoly by these two airlines in the Iberian Pennisula.

Quoting BoeingBus (Reply 3):
I believe this is the worst that can happen to Portugal and its airports. I'm hoping that the Portuguese government and its citizens would not allow this to happen as it would be anti-competitive.

Agree 100% with you on this one.

Quoting Hardiwv (Reply 4):

Consolidation is a matter of survival for any airline, and IB-TP would form an almost perfect match. We could go even further and envisaged a merger of IB and TP which would afterwards merged with BA.

The best move for both Tap and Portugal would be for Tap, Portugalia (PGA) and SATA to merge. Creating a stonger alliance to external threats.

Quoting BoeingBus (Reply 5):
TP grew 40% in the last 5 years. They are doing just fine and no consolidation is needed. Leave them alone - small carrier for a small country.

Unfortunatly things dont wok this way.

Regards,
Wings
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hardiwv
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RE: Iberia Might Be Interested In Buying Tap?

Wed Feb 22, 2006 12:26 am

Quoting WINGS (Reply 7):
The best move for both Tap and Portugal would be for Tap, Portugalia (PGA) and SATA to merge. Creating a stonger alliance to external threats.

And not competition for domestic flights in Portugal and to the island? No, thanks.

I still see IB+TP as a perfect match. The same worries expressed above were also underlined when AF was taking over KLM and LH merging with LX.

I dont see any future prsopect for TP in the long run without joining force with another major airline. In my view, even a combined IB+TP airline would at the end become merged with a major player such as BA.

Quoting WINGS (Reply 7):
. I would rather see LH taking a stake into Tap as they belong to a stronger group and while at the same maintaing its links with Star Alliance.

LH could be an option, however, LH has demonstrated interest in Asia while TP focus is on Brazil. LH is currently trying to take over Garuda Indonesia. TP and IB would benefit from synergies.

Quoting WINGS (Reply 7):
It might look like a good business move by some but a posible future participation by Iberia into Tap might creat an monopoly by these two airlines in the Iberian Pennisula.

The same was said about KL+AF on the France-Netherlands routes...this does not hold true, especially because there is a proliferation of LCCs (take the example of Spain with AirMadrid, AirEuropa and Spanair...).

Rgs,
 
airbazar
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RE: Iberia Might Be Interested In Buying Tap?

Wed Feb 22, 2006 12:53 am

This topic is being overblown. Buying a stake in a privatized TAP is not the same as merging. Singapore Airlines for example owns a large stake of Virgin Atlantic and has no influence whatsoever. This is just Iberia investing their money in a good company.

There is absolutely no benefit for Portugal and for TAP's customers for these 2 to merge. They have nothing in common except that both aim to have an all Airbus fleet. There's little overlap in their non-european network and market which would require both airlines to continue to exist as they are today. That's just not efficient and it's costly. Even in the AF/KLM merger we saw some consolidation of routes which would not happen with an IB/TP merger. And then there's the social and corporate differences between the two. Portugal and Spain may be neighbors but the two are as different as night and day. A merger between these 2 will just not happen.
 
hardiwv
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RE: Iberia Might Be Interested In Buying Tap?

Wed Feb 22, 2006 1:20 am

Quoting Airbazar (Reply 9):
A merger between these 2 will just not happen.

Disagree.

Quoting Airbazar (Reply 9):
This is just Iberia investing their money in a good company.

I have no doubt that IB, if buying a stake in TP, would influence on TP's corporate decisions.

Quoting Airbazar (Reply 9):
They have nothing in common except that both aim to have an all Airbus fleet.



Quoting Airbazar (Reply 9):
There's little overlap in their non-european network and market which would require both airlines to continue to exist as they are today.

Both airlines focus on the same region, this is extremely important and also represents complementarity since TP's strength is in Brazil while IB dominates the Spanish Latin American market.

TP+IB would make the best out of MAD-LIS hubs to dominate flights to Latin America.

There is no doubt that synergies are there, otherwise IB would not manifest an interest into the deal. I hardly see any other major airline interested in buying a stake in TP. IB comes first in mind, and they do have the cash and financial backing for this operation.

Quoting Airbazar (Reply 9):
Even in the AF/KLM merger we saw some consolidation of routes which would not happen with an IB/TP merger

Of course, KL/AF are much larger airline combined. Still, route consolidatation was made only on a few destinations such as MNL (left for KL) and CCS (left for AF). Just look at AF-KL financial results and you can clearly see the benefits of this merger. IB/TP would be a medium sized airline, which in my view could still be consolidated under BA's arms. I cant see any future prospects for TP if it still flies solo.

Rgs,
 
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RE: Iberia Might Be Interested In Buying Tap?

Wed Feb 22, 2006 1:40 am

Consolidation in Europe is needed. Europe is now a single aviation market - One of the reasons the EU wants to negotiate air traffic agreements - and that is bound to see, over time, airlines merge. Saying that, while TP and IB would be a good fit, maybe TP would have a better fit with another carrier, say LH or AF/KL, who could then use LIS as a focus city.
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airbazar
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RE: Iberia Might Be Interested In Buying Tap?

Wed Feb 22, 2006 2:03 am

Quoting Hardiwv (Reply 10):
Both airlines focus on the same region, this is extremely important and also represents complementarity since TP's strength is in Brazil while IB dominates the Spanish Latin American market.

TP+IB would make the best out of MAD-LIS hubs to dominate flights to Latin America.

Maintaining 2 hubs and 2 airlines to serve only 1 additional country (Brazil) is terribly inneficient and costly. IB would gain nothing from merging with TAP except access to Brazil. Is that worth the added cost? I doubt it. They would be better off increasing their own service to Brazil. And TAP would gain absolutely nothing from the merger. They already have access to the whole of S.America w/ Varig.

Quoting Hardiwv (Reply 10):
I hardly see any other major airline interested in buying a stake in TP.

They can't afford it. Remember, TAP is not a big company but it's an expensive company. More so now that they have taken over some of Varig's debt.

Quoting FlyCaledonian (Reply 11):
Consolidation in Europe is needed. Europe is now a single aviation market

Agree but a potential merger between TP and IB would not result in any consolidation in Europe. European traffic is being taken over by the LCC's. The merger would be all about expanding these carriers' non-European networks.

Again, I don't see a merger happening anytime soon. Getting TAP's Unions to agree too would be nearly impossible. Buying a stake in TAP, I can see that happen. In fact a few carriers have shown interest over the years, the most publicised ones being Swissair's and BA's interest. But that was a few years back. Most importantly. TAP doesn't needed. They are a well run and profitable company with tremendous growth potential, there's no way they would hand over a controlling stake to someone else.
 
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RE: Iberia Might Be Interested In Buying Tap?

Wed Feb 22, 2006 2:05 am

Quoting Hardiwv (Reply 8):

And not competition for domestic flights in Portugal and to the island? No, thanks.

Dont forget about AirLuxor (HiFly) and Euro Atlantic.

Quoting Hardiwv (Reply 8):
LH could be an option, however, LH has demonstrated interest in Asia while TP focus is on Brazil. LH is currently trying to take over Garuda Indonesia

LH also recognise that the South American continent is also one that they can not aford to forget.

Quoting Hardiwv (Reply 8):
The same was said about KL+AF on the France-Netherlands routes...this does not hold true, especially because there is a proliferation of LCCs (take the example of Spain with AirMadrid, AirEuropa and Spanair...).

In Spain yes but in Portugal no.

Quoting Airbazar (Reply 9):
There is absolutely no benefit for Portugal and for TAP's customers for these 2 to merge.

I agree.

Quoting Hardiwv (Reply 10):

Both airlines focus on the same region, this is extremely important and also represents complementarity since TP's strength is in Brazil while IB dominates the Spanish Latin American market.

Even though Tap has a strong presence in Brazil they also have a strong presence in Africa. Especially with its ex Colonies.

Quoting Hardiwv (Reply 10):

Of course, KL/AF are much larger airline combined. Still, route consolidatation was made only on a few destinations such as MNL (left for KL) and CCS (left for AF). Just look at AF-KL financial results and you can clearly see the benefits of this merger. IB/TP would be a medium sized airline, which in my view could still be consolidated under BA's arms. I cant see any future prospects for TP if it still flies solo.

I believe that there will be no way in hell that LH will ever alow Tap to be taken over by Iberia, or even take a stake in Tap. Both Star Alliance and LH know that they need a strong European Airline that serves both the South American continent and Africa. If Star Alliance looses Tap than I can not think of another European Airline that could fill that role as well as Tap.

Regards,
Wings
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hardiwv
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RE: Iberia Might Be Interested In Buying Tap?

Wed Feb 22, 2006 2:06 am

Quoting FlyCaledonian (Reply 11):
Consolidation in Europe is needed. Europe is now a single aviation market

Agree 100%

Quoting Airbazar (Reply 12):
Maintaining 2 hubs and 2 airlines to serve only 1 additional country (Brazil) is terribly inneficient and costly.

You cannot call Brazil "only" one additional country. Brazil is half of South America and would justify IB keeping the LIS hub. GRU and GIG can keep dual operations of both IB and TP (the same way KL/AF also run dual operations in GRU).

Quoting Airbazar (Reply 12):
IB would gain nothing from merging with TAP except access to Brazil

You call access to Brazil nothing?

Quoting Airbazar (Reply 12):
They can't afford it.

They do, otherwise they would have not manifested interest. IB also showed interest in Mexican AM.

Rgs,
 
boeingbus
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RE: Iberia Might Be Interested In Buying Tap?

Wed Feb 22, 2006 3:02 am

Hardi,

I personally don't want my airline to be hijaked by another whos sole purpose is to gain access to Brazil. Brazillians should really care about TP as this merger would make ticket prices go up ever further than they are now due to less competition. I'll admit it upfront that I care about Portugal exclusively when it comes to its citizens and aviation sector and IMO this IB merger is not a good thing for the Portuguese citizens. Period!

You can say all you want but you are not going to change my mind in that this will have no impact on the world and that the Portuguese must submit their airports to MAD in the name of consolidation. You as a non-Portuguese can care less of what happens to LIS, but I do.

I would have no problems for LH, or AF looking into being an investor in TP. But not IB as they would destroy LIS and TP. Again, it's my opinion. You can disgree but you are not going to change my mind.

You bring up up the AF/KLM merger all the time... But it's still a relatively young relationship and they continue to be in a honey moon period as few decisions were made... give it another 5 years or so and then lets talk to see what happens to KLM. CDG/AF domination will happen - it's inevitable.

Cheers,

Ric
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airbazar
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RE: Iberia Might Be Interested In Buying Tap?

Wed Feb 22, 2006 3:39 am

BoeingBus, I understand your sentiments however you also need to understand that once TAP becomes a private company, the interest of the company will be above the interest of the Portuguese customers and they'll do what's best for the company and not what's best for Portuguese aviation. Having said that, and as I said in a previous post, i don't think at this point in time that TAP would give up any sizable controlling interest to anyone else simply because they don't need to. They are doing fine and growing, they are profitable, they would be nuts to give up control of the company.
 
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RE: Iberia Might Be Interested In Buying Tap?

Wed Feb 22, 2006 6:44 pm

Thank you all for your responses and some quite interesting discussion, very much appreciated. I too, would rather see TP continue to grow in the manner which they have over previous years. That said, I recognise that Europe is one market and that consolidation is inevitable.

However, I feel that this is IB looking at the situation in it's very early stages. Mr Mullor's comment ``We'll study the operation if it's a real privatization, without limits,'' implies that the Portuguese Government, at this stage, wishes to move forward with the Privatisation with the intention of building upon the success which TAP has grown over recent years as mentioned in some of the other replies. That is, it's their intention to protect TAP's interests.

Thanks and regards, PanAm_DC10
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