LISBON, Oct. 15 -- Portugal will keep 50.1 percent of TAP Air Portugal and hand the running of the airline to Lufthansa, the government announced on Wednesday, choosing the German group over Air France-KLM for the first phase of the carrier's privatisation.

Lufthansa will pay €1.201 billion for 44.9 percent, according to Euronews's account of the announcement, with 5 percent of the shares reserved for employees; the winning investor may also buy any employee shares left untaken. Prime Minister Luis Montenegro said the process was run with "strict respect for competition" and that Lufthansa's "financial offer is 16% higher than the rival proposal."

Ownership and control split here. The state keeps its majority, but Lufthansa takes ...