Lisbon (AFP) - German airline Lufthansa has won the contest to buy nearly half of TAP Air Portugal, the Portuguese prime minister said Wednesday, after months of efforts to privatise the state-rescued airline.

Lufthansa beat out Air France-KLM with an offer of 1.025 billion euros ($1.14 billion) for a 44.9 percent stake in TAP, Prime Minister Luis Montenegro told journalists after a cabinet meeting.

TAP, which was renationalised in 2020 to stem heavy losses from the Covid-19 pandemic lockdowns, is among the few remaining state-owned carriers in Europe.

“After studying the proposals, the government has chosen Lufthansa, whose financial offer was 16 percent higher than the competing bid,” Montenegro said.

The state will keep 50.1 percent of the airline’s shares, while for now employees will own the remaining five percent.

It wants to ensure that Lisbon remains a strategic hub for flights to Brazil and Africa, with its headquarters remaining in Portugal.

Lufthansa will have executive and operational control of TAP.

The deal requires approval from the EU Commission and likely will not close until 2028, the government said.

The government also evoked for the first time Wednesday the potential of a full privatisation of TAP, in exchange for a stake in Lufthansa.

- Still unprofitable -

Lufthansa chief executive Carsten Spohr welcomed gaining “a strong and profitable airline… a leading carrier on South Atlantic routes”.

According to XTB brokerage TAP has an 11 percent share of routes between Europe and South America. That is behind the IAG group, which includes British Airways and Iberia, at 20 percent and Air France-KLM at 17 percent. However it is ahead of Lufthansa at nine percent.

The Portuguese government committed to a deep restructuring of the airline in 2021 in exchange for EU approval of 3.2 billion euros of public aid to keep it afloat.

IAG had also considered bidding to add TAP’s network to their own operations, before abandoning the contest.

The airline has around 7,700 employees and a fleet of around 100 Airbus planes.

It revealed in August a net loss of 59.3 million euros ($68.8 million) in the second quarter even as the key summer travel season ramped up, a steep reversal from a profit of 38.3 million euros in the period last year.

Like other airlines, TAP has been buffeted by soaring jet fuel costs from the war in the Middle East.

It nonetheless hit a record of 8.2 million passengers during the quarter.

Prime Minister Luis Montenegro noted that Lufthansa’s investment values the company at 2.55 billion euros, while three years ago the value of the airline was estimated at between 700 million and 1.7 billion.