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Brussels – The European Commission approved on Monday that Romania provide 95.3 million euros (473.69 million lei) in restructuring aid to the state-owned airline TAROM, the body announced.
“The restructuring aid approved today helps maintain regional connectivity for Romanian citizens and businesses. During our thorough investigation, we concluded that the restructuring plan allows for the restoration of the company’s long-term viability while minimizing the distortion of competition, as the restructuring significantly reduces the number of its flights and aircraft,” the European Commission’s statement quoted Vice President Margrethe Vestager as saying.
The state aid was approved by the EU body with the aim of restoring the company’s long-term viability without distorting the competitive market. The amount includes 49.53 million euros of aid approved by the Commission in February 2020 (including interest) and 45.77 million euros in capital injection.
Romania notified the European Commission of the TAROM restructuring plan on May 28, 2021, which involves rationalizing the airline’s operations, renewing its aging fleet, and reducing costs. In July 2021, the Commission launched a thorough investigation to determine if the planned restructuring measures are in line with EU state aid rules.
According to the European Commission, these measures are proportionate, as the airline contributes a significant amount, 77.66 million euros, to the implementation of the restructuring plan. The amount was generated from the sale and leasing of aircraft. At the same time, the state aid only limitedly distorts the market competition, since the reduction in the number of its flights and aircraft keeps TAROM’s market share low until the end of the restructuring period, December 31, 2026.
“Based on these considerations, the Commission has concluded that Romania’s measures comply with EU state aid rules,” the statement read.
EU state aid rules, specifically the Commission’s guidelines on rescue and restructuring state aid, allow member states to assist companies in difficulty under certain strict conditions. As a condition of the aid, the company must implement a reliable restructuring plan to restore its long-term viability and contribute to the costs of restructuring. Furthermore, it must ensure that market competition distortion is limited and that the measure contributes to achieving some common interest goal.
“This is a very important step for TAROM, one of Romania’s flagship companies, which is initiating a comprehensive recovery and restructuring process. The aid approved by the European Commission proves that the company is currently on the right track,” TAROM announced.
According to Adina Vălean, the European Commission’s Commissioner for Transport, the approval of the aid represents a “health certificate” for the company, and the decision facilitates the search for investors for further developments.
“This 95.3 million euro state aid and the restructuring plan thoroughly analyzed by the Commission mark a new beginning for TAROM. It fundamentally represents the restructuring of a debt-free, healthy company with a solid plan, and we can only hope that it will perform well in the future,” stated Vălean, who reminded that such a restructuring plan must meet certain criteria, and the European Commission deemed the plan “very well-founded,” and that the company can become profitable again in the future.
“We have obtained the European Commission’s approval for the support to TAROM /…/ This airline is Romania’s brand, in which I will continue to believe! With this money, we want to build a modern, efficient, and fully digitalized company that adapts to a market where competition is tougher than ever before. Over the next two years, TAROM can again become an airline that relies on its own economic performance to grow,” Romanian Prime Minister Marcel Ciolacu wrote on his Facebook page.
Founded in 1954, TAROM operates under the Ministry of Transport and has been a member of the SkyTeam airline alliance since June 25, 2010. The Romanian state airline has a fleet of 18 aircraft and operates 70 flights, using either its own aircraft or those of its code-share partners. TAROM has been a member of the International Air Transport Association (IATA) since 1993. (2024.04.29.)