Global aviation in Europe is very much controlled by the ”big three” European airline groups — Air France-KLM, IAG, and Lufthansa Group. These airline groups strategically try to buy up independent airlines, largely in order to prevent competitors from doing the same.
Continue reading: Lufthansa Wants To Invest In TAP Air Portugal
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Government aid would break EU rules, but an airline owning so many European airlines isn't a problem? Lufthansa excels at being mediocre. That said, the appeal of TP is undeniable. Demand to / from Portugal is off the charts, and its not just LIS (which is an awful hub for transfers) but also OPO. LH would benefit from TP's exposure to Brazil and would keep TP in Star Alliance.
Out of the major three European groups Lufthansa Group buying TAP wouldn't be good for passengers. Especially after their pursuit of ITA. Starting with Lufthansa's awful choices in catering and ending with TAPs role in keeping fares competitive not just to South America but also North America and within Europe.
Unlike ITA (which never should have been approved by EC), I don't see much problem with LHG acquiring TAP. There is no geographic overlap. It would be sad to see TAP brought down to LHG standards, as they're a pretty nice airline, but I don't see a problem with such transaction. For IAG on the other hand it would be virtually impossible to get approval since Iberia is just around the corner, serving more or less the same market. AFKL buying TAP would be very nice and probably not problematic, but they are currently spending their cash on SAS so I don't see this very likely.
Government aid has fixed rules, basically you can't have a government-financed airline at all. At most, a temporary scheme may be provided to get through "tough times". As for LHG "owning so many airlines", it's really one airline just with different brands. In the US you have the big 3 operating everything under one brand, in Europe it's split into smaller local brands for historical reasons, but otherwise it's the same concept. Plus in Europe we also have strong LCCs in addition to the big 3.
TAP fares 'across the Atlantic' aren't cheap at all. They do have great deals in both classes on their North American routes (including CUN), but they rarely offer anything attractive to Brazil, and awards are also hard to find - presumably they get good yields on GRU/GIG because business pax value the multiple frequencies and everywhere else because they are the only game in town.
I personally think that AFKL is a better fit for the TAP network, and will also be easier to integrate from an organisational culture perspective, but a LH minority stake would suit me really well as I have both *G status and a general preference for the alliance. A full takeover would be pretty bad for competition- maybe the transatlantic overlap isn't huge, but TAP offer connections to regional Spanish airports, Morocco, and West Africa (both continental and islands) where LHG can be one of a small number of options if travelling from/to the rest of Europe.
Not sure why the "labor relations" is the factor that was brought up for this discussion but yeah, I would've also far preferred AF-KLM. They are just better airlines, better flag carriers, better cultural symbols, far bigger and standout identities. And, say what you will about TAP, but it has a personality. They should be working with someone bolstering it, not suppressing while losing your luggage.
Labor relations is huge here! Air France/KLM
has had little strife since management changes almost a decade ago so, few disruptions due to employee strikes. Lufthansa on the other hand, seems to strike every other week - making them undependable to many travellers. WHO wants to book ahead not knowing with 99% certainty that a strike could happen (and does often with Lufthansa) - and then you get a shoulder-shrug of indifference from them like ‘oh well’. I don’t want to take that risk (which is huge)
You'd be surprised by how much time I spend there. Also, "the guy just doesn't understand how bad the bureaucracy is down here" is an indictment of Europe, not of my lack of knowledge about it.
You are probably a wonderful chap in person and I truly feel bad commenting on this, but "the guy just doesn't understand how bad the bureaucracy is down here" just proves the previous statement.
Americans call it "bureaucracy" and "unionised socialism". We call it human decency & quality of life. Someone who at KLM today still has the opportunity to stay with the company for life, buy property in the suburbs, have a family and retire well. Ground crew with seniority have to opportunity to transfer to operational positions or cabin crew positions in the last decades of service, starting at the bottom but keeping senior salaries.
Not a chance any of this is possible at Iberia or Lufthansa anymore, those opportunities died in the early 2000's there. IAG & LH Group have become soulless profit machines in the American image. Sad to see ITA and TAP go the same direction.
I fully agree with you on goals and ideals. And I guess i agree with you on other things too - Europe cannot have a truly free airline market, it would very quickly turn into something like Luft-AF-BA-Ryanair-easyjet with others bought or squeezed out. In that sense and environment, where an airline is a mix of a for profit venture but is also heavily guarded by the government it's only fair to expect it to provide the best living possible for those it employs. I would argue, however, that truly openly competing Luft-AF-BA-Ryanair-easyjet would on average offer better service, lower prices, and better wages to an average employee and client.
Oh Crap !
Well this is unfortunate... definitely a short-sighted move to go with Lufthansa because their offer is all-cash. Hopefully AF-KLM can counter. Otherwise, best of luck being a second-tier member of LH Group, TAP.
This is not very good news - I’m a Delta Million Miler and was hoping for Air France-KLM to
win the bid and eventually have TAP become
part of Skyteam. Moreover I like TAP and despise Lufthansa’s lack of schedule consistency - and especially how they have so many strikes that shut down operations and have so little disregard for their customers that are affected. Who in their right mind knowing all this would want to fly with them? Especially if you are originating or connecting through Germany?
Hey, LH hasn't had a strike since April. No thanks to connecting through CDG!
And besides, now I will be able to get roast goose in chimichuri sauce for Christmas.
So little disregard for customers? Was that a double negation...minus and minus becoming plus? :-p
So the big become even more bigger. How is that good for the consumer ?
Air France-KLM is already a major player on Europe to South America routes, especially to Brazil, whereas Lufthansa is relatively weak. Therefore, Lufthansa needs Lisbon as a hub for South America and Brazil more than Air France-KLM does. In a crisis environment, which happens often in the airline sector, Lufthansa is more likely to preserve Lisbon as a hub whereas Air France-KLM would retreat to Paris for South American services. The Portuguese Government with a majority stake plus labour with a 5% stake, however, would not allow this, which is why TAP is not an attractive investment and why IAG pulled out. Synergies are likely to be small as a result. This is not a merger or privatisation, just an acquisition of a large minority stake.
I can't say I'm sad that TAP will remain in the Star Alliance rather than the Misfit Toys Alliance. That said, TAP is a mediocre-at-best airline with a terrible hub airport.
Such a dark day in aviation history :'(
Lufthansa winning this bid is a total joke.
So you could say, they’d TAP that…
One reason Air France has better labour relations is the constant kotowing to the unions. If management just caves in at every whim of the unions then of course relations will be good. I am not sure it always means a better customer experience.
The latest, the cabin attendant union suggested to add an announcements during boarding that passengers close the overhead bins when full. To ease the workload and stress of the cabin crew during the boarding process. Management happily accepted.
And people wonder why France is hurtling toward an IMF bailout. Between the unionized workers and the coddled students, no one actually works.
CPH and Jack, huh, I thought those Russian data centers went offline... I guess they're back, since you're recycling the latest anti-EU propaganda. Conflating French bond yields with a cabin crew asking passengers to close overhead bins is peak right-wing internet fear-mongering. What matters in this story: If we actually care about consumers and workers, we'd prefer independent carriers like TAP to not be bought up by multinational conglomerates.
Otherwise, sure, AF has had ample strikes over the years, and those wins for labor have been hard fought, hard won, lest we forget; their unions are a strength, not a weakness. But, that's not really the issue in this story.
Conflating France's government debt problems with AF's labor relations is laughable. AF made a 1 billion euro profit last year. LHG lost 350 million on strikes in one quarter alone.
I don't think I drew a link from the state of Air Frances labour relations to anything but the airline itself. I might draw a line between the union's demands and the title of a Dire Straits song, but I'll skip that too.
The Air France cabin crew does not even reliably heat bread on European J flights as the union wants to keep work loads down.
My only point was to Ben's statement that Air France (now) seems to have the better labour relations, it does not necessarily mean better experience for the customers.
And on that point, Lufthansa Group only seems to be at war with the Lufthansa employees, less so with the Swiss, ITA etc. Employees.
Yes Air France has had their fair share of strikes and labour/management altercations. Who does not remember when AF executives had to escape over a fence while the employees literally tore their suite jackets and shirts of their backs. Don't think Lufti can top that. Yet. 🙂
@CPH-Flyer, as I am also a fan of the band, I must say: citing 'Money for Nothing' as your sick burn is ironic when you realize the song is actually mocking a bitter guy complaining "That ain't workin'!" because people are doing their jobs differently than he thinks they should.
And, if you're going to point fingers at flight attendants for managing their workload, remember what Knopfler sang on Solid Rock: "When you point your finger 'cause your plan fell through, you got three more fingers pointing back at you."
Aside from a 2015 shirt-ripping incident, I still think strong labor standards make for a better workforce in aviation (in Europe and elsewhere); burnout and high turnover help no one. Likewise, consumers would benefit if there was less, not more, consolidation in the industry.
I'm gonna re-listen to Brothers in Arms (1985), because the album basically covered the slick talkers of that era (very applicable to today). So, when I see folks trying to blame unions, it just feels like... 'Your Latest Trick' to me.
I am not anti union, I am in general pro union. But like all good things, they need to be applied in the right measure, and with the appropriate checks and balances applied. Management does need to be a counter balance. If I had to mention my prime example of unions gone too far I'd say look at the story of Scandinavian Airlines. Though the Air France unions would not be far behind on the list....
Closing the overhead bins when you use the last spot is just common courtesy for the next passengers...!
@Nic123
Yes and no. Passengers often have a slightly misguided view on what full is. Full for a lot of people means their stuff is up, and they don't want more stuff put in next to it....
And honestly, people will spend more time opening them again to verify that they are actually full as opposed to just observing they are full.....
So that will be 11 unique airlines under the Lufthansa group? They're really becoming the Coca-Cola (or PepsiCo, pick your poison) of airline brands
Don’t forget LH Cargo. And Eurowings Europe (although they operate under EW brand, abut with their own AOC).
TAP will never be allowed into the transatlantic JV.
TAP should have reflected on LH's treatment of SAS as the poor cousin within Star Aliens Europe - because that will be TAP's fate.
At least with the poor margins within the LH group, TAP has a good chance of being the second best performing carrier within the group.
Air France-KLM have to really be kicking themselves for walking away from an Air Europa deal in 2025. Vueling, Iberia, TAP are all partnered up and not a single partner hub west of Paris.
"On some level, the incentive for an airline group to acquire another carrier is simply to keep the airline out of the hands of a competitor" -- Exactly. And when Lufthansa pays too much for TAP, it has to cut expenses somewhere else: passenger services, staff salaries, or both.
A real shame, I hate to see what sort of Allegris-style stuff and Spohr-driven cost cutting LHG will have TAP do
The strikes they’re gonna see, it’s gonna be insane! Probably was shut down the whole country. All Lufthansa does is cut cost and staff, when the new airport opens they’ll be way more competition the biggest thing tap airlines fears at the moment as they kept blocking it.
Yet another cash-strapped country opting for a short-term win. Well I wish all the best to them, with all the job losses and dwindling employee benefits which soon the Portuguese government can pay for. AFKL was the most logical option, and Portugal would've benefitted from its share as Denmark will on the long-term.
I know most will think it should’ve gone to KLM with Lufthansa having so many airlines they own, but part of me is tired of these airlines changing alliances so it’s nice for them to be able to stay in star alliance