With SAS deal, Air France-KLM sets stage for battle over Portugal’s TAP | Airlines

LONDON/LISBON, Oct 6 (Reuters) – Air France-KLM’s (AIRF.PA) decision to take a stake in Scandinavia’s SAS airline offers a taste of its potential approach for the next big airline takeover battle in Europe: the fight to resuscitate Portuguese carrier TAP.

Portugal’s government said last Thursday it plans to sell at least a 51% stake in state-owned TAP, after the cabinet approved the legal framework for the privatisation process.

Europe’s national carriers have struggled to compete with low-cost airlines like Ryanair (RYA.I) and Wizz Air (WIZZ.L) and larger groups like Lufthansa (LHAG.DE), Air France-KLM and IAG (ICAG.L) have come in to revamp and save them.

Tuesday’s SAS deal, which saw U.S. investment firm Castlelake and Air France-KLM enter as new major shareholders alongside the Danish state, was another long-awaited shake up for one of Europe’s legacy brands.

Air France-KLM is only taking a 19.9% stake in SAS and may have limited influence in revamping the airline, which has struggled with fragmentation across its Danish and Swedish hubs.

Still, this arms-length approach may prove appealing to TAP.

Air France-KLM has tended to let airlines it invests in keep their operations and branding. Following the 2004 merger between the French and Dutch carriers, both still fly under their own livery and many operations remain separate.

Germany’s Lufthansa and Anglo Spanish IAG, other likely competitors in the battle for TAP, have been known for deeper restructurings of the airlines they takeover, streamlining business practices and branding.

“It will depend on what promises Air France-KLM make on keeping the brand alive, keeping the brand separate and keeping the operations in Portugal and connections in Portugal,” said James Halstead, an aviation analyst.

Analysts say the SAS deal is a…

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