Lufthansa (LH, Frankfurt Int'l) has declined to comment on Portuguese media reports, quoting Portugal's President Marcelo Rebelo de Sousa, that talks have resumed over a possible capital injection by the German carrier into struggling TAP Air Portugal (TP, Lisbon).

“Please understand that we do not comment on media speculations,” a Lufthansa spokesperson informed ch-aviation while not denying the allegations.

Speaking to journalists following a meeting in Luanda with the Angolan president, João Lourenço, De Sousa reportedly suggested that talks had resumed after they were put on hold by the COVID-19 pandemic. He said the matter had long been discussed and that a possible Lufthansa investment into TAP was underway but halted by the pandemic. "I think that the issue was closed on the eve of the pandemic. If there had not been the pandemic, there would most likely have been a positive development," he said, adding that COVID-19 had resulted in a change of plans. "As you know, on this issue the European Commission has a role to play and the pandemic has frozen that. But the reality was already far advanced before the pandemic", he was quoted by Portugal's Lusa news agency.

Portuguese media reported the government was keen on Lufthansa becoming a shareholder in TAP as this could assist its chances for Brussels to greenlight its EUR3.2 billion euros (USD3.7 billion) aid plans for the restructuring of the airline.

The European Commission (EC) on July 16, 2021, re-approved Portugal’s EUR1.2 billion (USD1.4 billion) emergency rescue loan granted to TAP last year but decided to review if the new restructuring aid plan for the airline complies with European Union rules.

Lusa said De Sousa had played down the EC’s investigation as a normal precaution carried out by the Commission in cases of state aid for the restructuring of companies.

Portugal’s ECO reported the re-assessment would take at least three months during which the government would have the opportunity to put its case to Brussels. It said one of the government’s key tactics was to secure private investment in TAP in order to convince the Commission that the airline would not be reliant on state aid going forward.

As previously reported, the government late last year reportedly informed the EC it was keen on Lufthansa becoming a strategic investor in TAP. It reportedly passed a similar message to Lufthansa’s shareholders. TAP's previous 22.5% shareholder, David Neeleman, had also been in discussions with Lufthansa and fellow Star Alliance partner United Airlines before the onset of COVID, but Lufthansa never made an offer.

A potential hurdle for such a deal would be that Lufthansa was also forced to accept EUR9 billion (USD10,1 billion) in aid from the German state and its other home markets. Under EU rules, until Lufthansa repays 75% of the recapitalisation, it cannot acquire more than 10% of another company.

Lufthansa Group earlier this month said it had cash and cash equivalents of EUR10.6 billion (USD12.6 billion) as of March 31, 2021, including uncalled funds from bailout packages from Germany, Switzerland, Austria, and Belgium. By that time, it had used around EUR2.5 billion (USD3 billion) of the EUR9 billion aid package. The Group on July 7 had further boosted its liquidity by raising EUR1 billion euros (USD1.19 billion) in a corporate bond sale and was preparing for a capital increase of between EUR3 billion and EUR5.5 billion (USD3.5-6.5 billion). The net proceeds from the capital raise would contribute in particular to the repayment of the state aid, it said, but gave no date or size for the measure.

The TAP Group recorded losses of EUR1.42 billion (USD1.6 billion) in 2020.