State airline privatisations advance as Portugal eyes debt reduction
Portugal's public finances could receive a boost from the partial privatisation of two state-owned airlines, with the sale processes for TAP Air Portugal and SATA Internacional moving into decisive phases. The Portuguese Public Finance Council (CFP) has identified these transactions as potential contributors to a faster decline in the public debt ratio, even though the proceeds will not directly improve the budget balance. The council projects the debt ratio will fall to 85.9% of GDP this year and 83.5% in 2027.
TAP enters final negotiation phase
The Portuguese government has opened final negotiations with Air France-KLM and Lufthansa Group, the two remaining candidates for the partial privatisation of TAP Air Portugal. On 1 September, the Participações Públicas (Parpública) submitted its analysis of the binding offers to the government, setting in motion a three-week final negotiation period extended to 31 December 2026.
The privatisation model prescribes the sale of up to 49.9% of the carrier's capital, with 5% reserved for employees. Should workers not subscribe their full allocation, the selected investor holds a right of preference to acquire the remainder. The state will retain a majority stake regardless of the outcome.
Francisco Calheiros, president of the Portuguese Tourism Confederation (CTP), told the Lusa news agency he would have preferred a full privatisation. "I think there are guarantees that it could be in the near future," he said, adding that full ownership would help the buyer capture synergies. He described both Air France-KLM and Lufthansa as "very serious players" whose involvement would benefit TAP by integrating it into a larger platform with greater purchasing power for aircraft, fuel, and insurance.
SATA Internacional receives five non-binding proposals
The privatisation of SATA Internacional – Azores Airlines has reached a critical milestone, with SATA Holding confirming receipt of five non-binding proposals following the 21 September deadline for submissions. The Azores-based aviation group had initially received eight expressions of interest and invited six qualified entities to proceed to this stage.
According to a company statement, the proposals will now be analysed and evaluated in accordance with the Caderno de Encargos (tender specifications). Entities selected from this phase will then be invited to submit binding offers.
Separately, SATA Holding confirmed that 11 entities have expressed interest in the privatisation of SATA Handling, another unit within the group. Those qualified have been invited to submit non-binding proposals by 21 October 2026.
The European Commission’s approved restructuring plan mandates the privatisation of both Azores Airlines and SATA Holding as a condition of financial aid to the SATA group. Unlike TAP, the goal for SATA is a minimum 75% sale, marking a fundamentally different model of divestment.
Strict labour and operational conditions apply
The tender documents for the SATA privatisations establish rigorous criteria to protect workers and ensure continuity of service. The prospective buyer of Azores Airlines must maintain headquarters and effective management in the Azores for at least 30 months, preserve the Air Operator Certificate for a minimum of three years, and ensure essential routes connecting the Azores with mainland Portugal and the diaspora in the United States and Canada.
Labour protections include a prohibition on collective dismissals and job eliminations for the first 30 months after acquisition. Selection criteria prioritise the bid price, the commitment to strengthening the company's financial capacity, the absence of legal or economic constraints, and the promotion of shareholder stability through a governance model appropriate to the airline's specific nature.
Debt trajectory and economic outlook
The CFP's updated Economic and Budgetary Perspectives forecast a budget surplus of 0.2% of GDP this year, shifting to a deficit of 0.2% in 2027. Beyond the airline sales, the council identifies other factors that could improve the public accounts, including €335 million from the sale of EDP dams, revenue from the Temporary Solidarity Contribution on the Petroleum Sector, and potential European support for storm damage responses.
Economic growth is projected at 2.2% this year, moderating to 1.8% in 2027. Inflation is expected to accelerate to 3.2% in 2026, driven by fuel price increases linked to renewed military operations in the Middle East, before easing to 2.6% in 2027.
Risks to the outlook include the possibility that geopolitical tensions could trigger additional support measures for the economy and households, as well as potential cost overruns, litigation outcomes, and contingent liabilities related to Banco Espírito Santo.
Airport constraints and tourism outlook
Calheiros acknowledged that capacity constraints at Lisbon's Aeroporto da Portela continue to limit growth. "The airport is not for tourism. It is a national infrastructure, decisive for the development of our economy," he said, warning that any investor considering Portugal sees the lack of capacity and "thinks twice".
The CTP president called for an intermediate solution at Montijo while the new Aeroporto Luís de Camões in Alcochete is built. Construction is scheduled to begin in four years, with the new facility potentially opening in mid-2037. The government has pressed ANA – Aeroportos de Portugal to accelerate this timeline and requested clarification on demand scenarios, runway configuration, and terminal expansion strategies.
On airport queues linked to biometric data collection, Calheiros said the problems that plagued terminals before summer appear to have been resolved. "At this moment, airport queues, I think, are a thing of the past," he said, crediting cooperation with the Ministry of Internal Administration while cautioning that vigilance remains necessary given Portugal's reliance on non-Schengen visitors from Brazil, Canada, the United States, and South Korea.
