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By Joanna Plucinska, Sergio Goncalves and Andres Gonzalez
DUBLIN (Reuters) - British Airways-owner IAG is likely to be a frontrunner to buy a stake in Portuguese carrier TAP, valued at about $1 billion, bankers and analysts said, marking the next phase in consolidation of the European market.
Aviation executives highlighted at the Airline Economics finance conference in Dublin last week the need for consolidation in the industry as it battles high costs and a price-conscious consumer base. They said it would also help carriers compete more effectively with U.S., Gulf and Asian rivals.
Europe's major airline executives are hoping the Portuguese government will start formal talks soon on the sale of either a minority or majority stake in its national carrier.
A spokesperson at Portugal's infrastructure ministry, which is overseeing the sale, said: "The government is still listening, assessing market interest... but the sale will take place this year."
Data from airline industry analyst Cirium presented in Dublin showed that 36 European airlines account for 80% of the continent's capacity, compared with six airlines in the United States.
The region's big carriers IAG, Air France-KLM and Lufthansa have expressed interest in the possible purchase of TAP, hoping to access the lucrative South American market and build a new hub for Southern Europe.
A banker with knowledge of the deal said that IAG, which owns Iberia and Aer Lingus, was the most keen and likely the strongest candidate to strike a deal with TAP, with analysts pointing to its success with Iberia in Madrid as a good starting point for a Southern European multihub base.
Lufthansa has also spent time lobbying government officials in Lisbon as it looks to expand its presence in southern Europe after buying a stake in Italy's ITA Airways.
Lufthansa declined to comment.
Jonathan Sullivan, chief corporate development officer at IAG, told journalists in Dublin the group was not ruling out taking a minority stake that would also allow for "a path for a majority stake," Portuguese news site Observador reported last week.
When asked by Reuters about IAG's interest in the TAP sale, IAG said Sullivan also emphasised that TAP would stay "a proudly Portuguese company, just as Aer Lingus is proudly Irish and British Airways is proudly British."
Analysts said this could prove to be an important element in IAG's potential success - retaining the national identity of the carrier is important to Portuguese government officials.