(Bloomberg) — Portugal picked a 348 million-euro ($391 million) offer by David Neeleman, the founder of JetBlue Airways and Azul SA, to take control of state-owned airline TAP SGPS SA, outbidding rival Latin American airline investor German Efromovich.
Neeleman proposed to pay 10 million euros for 61 percent of TAP and inject at least 338 million euros into the debt-laden airline in partnership with Portuguese bus company Grupo Barraqueiro, Sergio Monteiro, Portugal’s secretary of state for transport, said at a press conference in Lisbon.
The winning group has agreed to supply TAP with an additional 53 new planes and keep the carrier’s hub in Lisbon for at least 30 years, said Monteiro. Efromovich, owner of the Avianca Holdings SA airline brands, also bid for the carrier, losing out for the second time in less than three years.
Neeleman’s consortium “offered more money” than Efromovich, which will enable the airline to face the difficult challenges ahead, said Monteiro. “This privatization is from all points of view a success in financial terms.”
The government is also selling 5 percent of TAP to employees. TAP, whose business includes a maintenance unit in Brazil besides the airline itself, posted a loss of 85.1 million euros in 2014, up from a 5.9 million-euro loss the previous year. It had 1.06 billion euros of debt at the end of last year. Its fleet includes 61 Airbus aircraft, six Fokkers, eight Embraers and two ATR turboprops.
The country agreed in 2011 to sell TAP as a condition for aid from the International Monetary Fund and the European Union. The Portuguese government rejected an offer from Efromovich in 2012, citing a lack of financial guarantees. The Swissair Group agreed to buy a stake in TAP in 1999, then backed out in 2001, later declaring bankruptcy.
Neeleman has founded three airlines, including JetBlue in the late 1990’s and Azul, Brazil’s third largest carrier, in 2008 following his departure from JetBlue. TAP’s chief attraction is its 77 weekly flights from Portugal to Brazil, though the company also offers almost the same number of services to Africa and operates 43 routes within Europe.
The purchase of TAP will pit Azul against Latam Airlines Group SA, the biggest South American carrier, which is planning to build an international hub in Brazil’s Northeast for European destinations.
Asked whether the purchase of a controlling stake in TAP by a consortium led by Neeleman, who holds U.S. citizenship, could be challenged by the EU — whose rules limit airline ownership by investors from outside member countries to 49 percent — Monteiro said “there are no significant risks.”
“I would even say there are practically no risks,” said Monteiro. “There are no veto rights by the main shareholder that would hamper the development of TAP’s business.”
–With assistance from Joao Lima and Anabela Reis in Lisbon.
This article was written by Christiana Sciaudone and Henrique Almeida from Bloomberg and was legally licensed through the NewsCred publisher network.