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The European Commission on Monday approved, under EU State aid rules, Romania's plans to grant the Romanian state-owned flag carrier TAROM restructuring aid for up to EUR 95.3 million (RON 473.69 million), the commission reported on Monday.
The measure would enable the company to restore its long-term viability while minimising competition distortions.
"The Romanian restructuring aid approved [on Monday] will help maintain regional connectivity of Romanian citizens and businesses. Following our in-depth investigation, we concluded that TAROM's restructuring plan will ensure that the airline becomes viable in the long term. To limit any possible competition distortions triggered by the public support, TAROM will significantly downsize its number of routes and aircraft," Margrethe Vestager, Executive Vice-President in charge of competition policy, is quoted as saying in a press statement released by the commission on Monday.
On May 28, 2021, Romania notified to the commission a plan for the restructuring of TAROM. The restructuring plan sets out a package of measures for streamlining TAROM's operations, renewing its ageing fleet and reducing costs.
In July 2021, the commission opened an in-depth investigation to assess whether the Romanian restructuring measures in favour of TAROM would be in line with EU state aid rules. During the in-depth investigation, Romania updated the restructuring plan to address the concerns raised in the opening decision.
The notified restructuring measures now include a debt write-off of around EUR 49.53 million (RON 246.19 million) corresponding to the rescue aid amount, approved by the commission in February 2020, plus interest; and a capital injection of around EUR 45.77 million (RON 227.50 million).
The commission assessed the measures under its guidelines for rescuing and restructuring non-financial undertakings in difficulties, finding in particular that the aid contributes to the objective of common interest of providing regional connectivity to Romanian citizens and businesses by enabling TAROM to return to viability through the implementation of its restructuring plan.
Also, the restructuring measures tackle the problems that caused TAROM's financial difficulties, in particular through the renewal of its ageing fleet and the reduction of costs.
According to the commission, the measures are proportionate, as TAROM makes a significant own contribution of around EUR 77.66 million (RON 381.12 million) in the form of proceeds from aircraft sale and a finance lease concluded at market terms, and the aid comes with safeguards to limit distortions of competition in the Single Market. These include the reduction of the number of routes that TAROM operates, as well as the number of aircraft, and maintaining such reduced capacity, thereby limiting its market presence for the entire duration of the restructuring period, namely until December 31, 2026.
On this basis, the commission concluded that the Romanian measures are in line with EU State aid rules.
EU State aid rules, more specifically the commission's guidelines for rescuing and restructuring non-financial undertakings in difficulties enable member states to support companies in difficulty, under certain strict conditions. The guidelines only allow a state intervention in a company in financial difficulty under specific conditions, requiring in particular that the company undertakes a sound restructuring plan to ensure its return to long-term viability, that the company contributes to the cost of its restructuring, that competition distortions are limited and that the measure contributes to an objective of common interest.
The restructuring state aid for TAROM of up to EUR 95.26 million approved on Monday by the European Commission proves that we are on a good trajectory, according to representatives of national airline.
"This is a very important step for TAROM, one of Romania's flagship companies that will ignite an ample recovery and reorganisation process, and the aid that the European Commission has approved proves the good trajectory of the company at this moment," TAROM representatives said.
The financial aid was approved by the European Commission with the aim of restoring the company's long-term viability while minimising competition distortions. Of this, EUR 49.53 million (RON 246.19 million) is to the rescue aid amount, approved by the commission in February 2020, plus interest; and a capital injection of around EUR 45.77 million (RON 227.50 million).
The European Commission's approval of the restructuring aid means TAROM has the green light for all actions included in the submitted recovery and organisation plan, which were being implemented. TAROM's objectives are to regain profitability and become a successful airline again, thus bringing many benefits to the customers it serves.
AGERPRES
