Air France-KLM Eyes Investing in Portugal's TAP

Portugal is beckoning to Air France-KLM as the group evaluates opportunities to expand in southern Europe. An investment in state-owned TAP Air Portugal would complement a potential deal for Italy's ITA Airways in several of Europe's fastest recovering markets.

"We’re very comfortable with the Iberian peninsula, and TAP could be [an] option for us to have a larger presence," Air France-KLM CEO Ben Smith said during its third-quarter earnings call on Friday. The group will "definitely engage" with the Portuguese government on a "formal basis" when it is ready to sell down its full ownership in TAP, he added.

An Air France-KLM and TAP deal would just be the latest in what is becoming something of an airline consolidation spree in southern Europe. The group is already part of the preferred bidding consortium selected by the Italian government to takeover ITA; private equity firm Certares leads the bid. And International Airlines Group is working on a new structure for its proposed takeover of Spain's Air Europa with an aim to close the deal by the end of 2023.

All these potential airline deals come as Europe's budget carriers, from EasyJet to Ryanair and Wizz Air, are rapidly expanding in many of the same markets. This is fueled, in part, by slot divestitures that legacy airlines like Air France-KLM and TAP agreed to as conditions of