Air France-KLM remains interested in acquiring TAP Air Portugal (TP, Lisbon) should the Portuguese government launch a reprivatisation process, albeit only if it does not dilute the holding's margins.
"We do find it a very interesting opportunity. It's not yet an opportunity but one that we expect to come into play. There still needs to be a government motion passed in Portugal to open the sale process formally... It's very interesting and could potentially be accretive to our bottom line performance. However, we are not going to enter any type of M&A that puts risk to the 7% to 8% margin we've committed to in the next 2 to 3 years," Group Chief Executive Ben Smith said during a quarterly earnings call.
Smith underlined that TAP is attractive thanks to its strong position in Latin America, particularly in Brazil, from its Lisbon base. He stressed, however, that Air France-KLM is margin-focused and would not "grow just for the sake of growing".
The Portuguese government plans to launch a reprivatisation tender shortly, although the exact timeline and procedures have not been confirmed.
Smith added that the Franco-Dutch airline is looking at various options for expanding its presence in Latin America, including with its long-time partner carrier GOL Linhas Aéreas Inteligentes (G3, São Paulo Congonhas). Air France-KLM continues to own a 1.3% stake in GOL, which has recently allied with Star Alliance member Avianca Group to form Abra Group.
"We're still studying what best way forward for medium, long-term positioning in South America. We are the number 2 operator in terms of capacity already between Europe and South America, we're starting from a high base. There are options both in Europe and in South America, how we could partner up with in a more strategic way to improve our position... We do have a historical relationship with GOL, we still have a very, very small investment in GOL that was put together just to solidify the relationship many years ago. LATAM Airlines Group does have now an immunised JV with our partner Delta Air Lines (DL, Atlanta Hartsfield Jackson). So discussions and potentials with LATAM are now available to take place in a very different context," Smith said.
Meanwhile, Air France-KLM announced it has entered into exclusive discussions with Apollo Global Management for a EUR500 million euro (USD551 million) quasi-equity financing instrument dedicated to the holdings' engineering and maintenance activity.
The holding said the deal would be similar to the July 2022 EUR500 million agreement with Apollo on Air France-KLM's pool of spare engines. The holding stressed the financing would cause no operational effects.
"At the same time, we are working further on the loyalty program. We received several non-binding offers, and we are actually in current discussions to find the right potential investor for that one. So, we are moving further in improving our equity, moving further in getting a release of all the state aid and improving our debt situation," Chief Financial Officer Steven Zaat said.