Commission approves €95.3 million Romanian restructuring State aid for airline TAROM

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The European Commission has approved, under EU State aid rules, Romania’s plans to grant the Romanian state-owned flag carrier TAROM restructuring aid for up to €95.3 million (RON 473.69 million). The measure will enable the company to restore its long-term viability while minimising competition distortions.

The restructuring aid

On 28 May 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: (i) a debt write-off of around €49.53 million (RON 246.19 million) corresponding to the rescue aid amount, approved by the Commission in February 2020, plus interest; and (ii) a capital injection of around €45.77 million (RON 227.50 million). 

The Commission’s assessment

The Commission assessed the measures under its Guidelines for rescuing and restructuring non-financial undertakings in difficulties (‘R&R Guidelines’). In particular, it found 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. 
• 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.  
• The measures are proportionate, as TAROM makes a significant own contribution of around €77.66 million (RON 381.12 million) in the form of proceeds from aircraft sale and a finance lease concluded at market terms.
• The aid comes with safeguards to limit distortions of competition in the Single Market. These include (i) the reduction of the number of routes that TAROM operates, as well as the number of aircraft, and (ii) maintaining such reduced capacity, thereby limiting its market presence for the entire duration of the restructuring period (i.e. until 31 December 2026.)

On this basis, the Commission concluded that the Romanian measures are in line with EU State aid rules.

Background

EU State aid rules, more specifically the Commission’s R&R Guidelines, 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 non-confidential version of the decision will be made available under the case number SA.59344 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.

Quote(s)

The Romanian restructuring aid approved today 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