Sunday, 6 January 2013

Is there potential for a TAP-Air Portugal - LOT(Poland) tie-up?

A very recent report on a WSJ blog and polish business blog says that the Polish Government is seeking to shrink the national airline company LOT and eventually privatize it.

Given the success that Portuguese Retail Group Jeronimo Martins has had in penetrating the Polish Retail market with its Biedronka chain and given that the Portuguese Govt. has just rejected the only offer in the bidding for Portugal's national airline, is there potential for some clever business here? Amazingly, a few days ago, after the rejection of the TAP bid, I was actually ruminating along the lines of an Air France/KLM or Iberia/BA (IAG) type tie-up between TAP-Air Portugal and LOT.

TAP Air Portugal's route network targets Europe, the Eastern Seaboard of the USA, South America and certain African destinations. The LOT route network targets Eastern Europe, Russia, South Eastern Europe and the Caucasus, the Eastern Mediterranean Basin and China, (Beijing).  

Sounds an interesting mix!

However, in terms of fleet compatibility, there is a problem. LOT operates a mainly Boeing fleet with some Embraers. TAP Air Portugal fleet, meanwhile, is now almost exclusively only Airbus, albeit also with some Embraers! So the potential for short/medium-term savings on fleet rationalisation is limited.

Both Airlines are, however, members of the Star Alliance Grouping. Furthermore, they are both airlines fully owned within the EU, allowing for full mergers and not bound by the 49% restriction on external-EU ownership of EU airlines.

I also think such a joint-venture could be an interesting boost to both Portuguese and Polish tourism. It would give Poland better access to the Portuguese and, more importantly, Brazilian Tourism market as well as opening up the Portuguese traditional tourism market (Algarve, Lisbon, Porto, Madeira) to the Polish market. There would also be potential for development of religious tourism given that both countries host important Roman Catholic Shrines. (Portugal - Fatima, Poland - several)

The above reservations notwithstanding it appears to me that there may be some scope for exploring a possible very successful joint-venture between these two well established historic middle-ranking European airlines with route networks that could be extremely complementary.