EU Commission Approves State Aid for TAROM Rescue. Route Reduction Expected

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The European Commission approved, on Monday, Romania’s plans to grant the state-owned national air carrier, TAROM, restructuring aid worth up to 95.3 million euros (473.69 million lei), based on the EU rules on aid state.

“The restructuring aid granted by Romania that was approved today (Monday, n.r.) will contribute to maintaining the regional connectivity of citizens and businesses in Romania. Following our in-depth investigation, we have concluded that TAROM’s restructuring plan will ensure the airline’s long-term viability. In order to limit the possible distortions of competition generated by public support, TAROM will significantly reduce the number of routes and aircraft”, said Vice-President Margrethe Vestager, in a press release from the European Executive.

Three years ago, on May 2021, Romania notified the European Commission of a restructuring plan for the TAROM company, which established a package of measures to rationalize the air operator’s operations, renew its outdated fleet and reduce costs.
Later, in July 2021, the Commission opened an in-depth investigation to assess whether the restructuring measures adopted by Romania in favor of TAROM would be in line with EU rules on state aid. During the in-depth investigation, Romania updated the restructuring plan to respond to the concerns expressed in the decision to initiate the procedure.
Currently, the notified restructuring measures include the cancellation of a debt amounting to approximately 49.53 million euros (246.19 million lei), corresponding to the value of the rescue aid approved by the Commission in February 2020, plus related interest and a capital injection of approximately 45.77 million euros (227.50 million lei).
The Commission assessed the measures under its Guidelines for rescuing and restructuring non-financial enterprises in difficulty and found, in particular, that the aid contributes to the common interest objective of ensuring regional connectivity for citizens and businesses in Romania, enabling TAROM to restore its viability through the implementation of its restructuring plan, it is stated in the quoted press release.
The restructuring measures also address the problems that caused TAROM’s financial difficulties, especially by renewing its aging fleet and reducing costs. According to the EC, the measures are proportionate, because TAROM makes a significant own contribution of approximately 77.66 million euros (381.12 million lei) in the form of revenues from the sale of aircraft and from a financial leasing contract concluded under market conditions, and the aid is accompanied by guarantees to limit the distortion of competition in the single market.
The guarantees consist of reducing the number of routes on which TAROM operates, as well as the number of aircraft and maintaining such a reduced capacity, thus limiting its presence on the market for the entire duration of the restructuring period, i.e. until December 31, 2026. “On this basis , the Commission concluded that the measures applied by Romania comply with the EU rules on state aid”, informs the Community Executive.
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