IAG, Lufthansa out of Race for Portuguese Airline TAP

   By Patricia Kowsmann 
 

LISBON--International Consolidated Airlines Group SA (ICAGY, IAG.MC, IAG.LN) and Deutsche Lufthansa AG (DLAKY, LHA.XE) didn't put in bids for Portugal's TAP SGPS SA, highlighting the challenges the Portuguese government faces in trying to sell the airline amid difficult conditions in the sector.

The first round of bids were due Friday. Both IAG--the parent company of British Airways and Spain's Iberia--and Lufthansa have expressed preliminary interest in TAP. An IAG spokeswoman said Monday the company's interest faded over the past months.

The company's Iberia operation is having a lackluster performance, as Spain has grappled this year with a major banking crisis. In August, IAG warned it expects to make a small loss for the year.

Lufthansa also didn't bid for TAP, people familiar with the situation said.

The company has said it is focused on managing its current businesses and costs.

The Portuguese government needs to sell the TAP by the end of the year under a requirements of its bailout program, but the timing is tricky. Most of Europe's flag carriers battle with uneconomical domestic operations on which they rely to feed traffic to more-lucrative long-haul destinations, where competition from Asian rivals is heating up.

TAP is worth around 1.2 billion euros ($1.6 billion) if valued on a multiple of eight times earnings before interest, taxes, depreciation and amortization in 2011, the average multiple of recent deals in the sector, according to government and airline officials.

The airline is a potentially attractive asset because of its leading share of traffic between the fast-growing market in Brazil, a former Portuguese colony, and Europe.

Write to Patricia Kowsmann at [e-mail]