TAP and several other state companies are slated for privatization this year as part of Portugal's financial recovery plan.
Portugal signed up to a 78 billion euro international bailout on Th
"TAM approached the government to see if it could obtain financing to participate in the privatization of TAP," a source close to the talks said. He requested anonymity because he was not authorized to discuss the issue.
The source did not know the size of the stake or the amount of financing involved.
A TAM spokesman declined comment.
The government was in principle interested in backing TAM but financial support could depend on the outcome of the airline's proposed merger with Chile's LAN.
"The government would welcome the acquisition (of TAP) and could finance it, depending on the resulting shareholder structure of the LAN merger," the source said.
The government would be more inclined to finance a Brazilian company than a Chilean one, the source said.
Enrique Cueto, CEO of LAN airlines, would head the merged company but the shareholder structure of what would become Latin America's largest company was not yet clear.
Under Brazilian law foreigners cannot hold more than 20 percent of a domestic airline.
Chilean anti-trust authorities have said that they could rule on the TAM-LAN merger in coming weeks.
TAM faces increased competition in Brazil's booming air travel market and in March announced talks to merge with the domestic regional carrier Trip.
Its competitor Gol Linhas Aereas < knocked TAM out of the top spot in Brazil's aviation market in February for the first time ever, garnering 39.77 percent market share vs. TAM's 39.59 percent.
Brazil has been seeking ways to help its financially troubled former colonizer, including the possible acquisition of sovereign debt.
"One of the possibilities is to buy part of Portugal's sovereign debt. We're also looking at other alternatives, such as an early repurchase of Brazilian bonds held by the Portuguese government," Rousseff said during a visit to Portugal in March. (Reuters)
