EC OKs EUR 36m state aid for Tarom

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The European Commission has approved today Romania’s plans to grant a temporary loan of EUR 36.7 million (around RON 176 million) to the state-owned flag carrier TAROM.

The EC says that Romania has committed to fully reimburse the loan in six months, otherwise TAROM will have to come up with a liquidation plan or to enforce a comprehensive restructuring in order to be viable on long term.

The aid is meant to enable the orderly continuation of air transport services, in particular on the numerous routes where TAROM is the only provider, and avoid disruptions for passengers, without unduly distorting competition in the Single Market.

In February 2020, Romania notified the Commission of its intention to grant a rescue loan of around €36.7 million (around RON 176 million) to TAROM. The airline faces an acute liquidity shortage, due to the steep increase in operating costs generated by its ageing fleet over the last years. Absent the aid, TAROM will no longer be able to fulfil its payment obligations while keeping operations running.

The Commission’s Guidelines on rescue and restructuring aid allow Member States to support companies in difficulties, provided, in particular, that the public support measures are limited in time and scope and contribute to an objective of common interest. Rescue aid can be granted for maximum six months to give a company time to work out solutions in an emergency situation.

In the present case, the Commission has taken the following elements into account:

  • The loan will cover only TAROM’s demonstrated liquidity needs over the next six months and Romania will carry out a stringent monitoring of how the funds are used; and
  • Romania committed to ensure that, after six months, the loan will be fully repaid, or TAROM will either submit a liquidation plan or carry out a comprehensive restructuring in order to become viable in the long-term. Such possible restructuring would be subject to the Commission’s assessment and approval.

“The Commission found that the measure will help ensure the orderly continuation of flight services, in the interest of air passengers and maintain regional connectivity on the numerous routes where TAROM is currently the sole provider. At the same time, the strict conditions attached to the loan and its duration limited to six months will reduce the distortion of competition potentially triggered by the State support to a minimum,” reads a press release.

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