Government proposes state aid of almost €8 million for Tarom to cover losses in the last half of last year

Carmen Radu aug. 25, 2021 0 comentarii

The government wants to grant the national airline Tarom €7.95 million in aid to cover losses caused by the pandemic in the second half of last year.

The government has on the agenda for Wednesday’s meeting a memorandum to grant individual state aid to the national airline Tarom, for losses incurred between 1 July 2020 and 31 December 2020 as a result of and directly caused by the COVID-19 pandemic.

According to the memorandum, the amount of damage caused by the COVID-19 pandemic that can be covered by state aid for this period is up to 38,654,017 lei (€7,956,776).

The damage caused to Tarom by the COVID-19 pandemic consists of the loss of revenue due to the suspension of flights on certain routes, adjusted by the costs that were avoided as a result of the reduced volume of activity. The damage is calculated as the loss of value compared to what TAROM could have achieved if the crisis generated by the COVID-19 pandemic had not occurred and if TAROM had been able to operate within normal parameters (i.e. compared to the same period of 2019).

Thus, the Government proposes to the European Commission to authorize state aid of up to 38,654,017 lei (€7,956,776). The amount of the aid will ultimately be determined by European Commission Decision.

The executive argues that the funding of the airline is absolutely necessary to ensure the operation of TAROM during the COVID-19 pandemic and in the immediate aftermath, until the resumption of air transport operations, the adjustment of the level of activity to the new levels of demand and the stabilization of the company’s financial situation, while allowing the company to proceed with the implementation of the restructuring plan that will ensure its medium and long-term profitability.

It should be recalled that at the end of 2020, the Romanian authorities also granted Tarom state aid, authorized by the European Commission, to cover damages (€19.33 million) directly linked to and caused by the COVID-19 pandemic, granted for losses incurred between 16 March and 30 June 2020 and caused by the restrictions imposed by the Romanian Government.

As Tarom did not have the financial capacity to repay the state rescue aid, the Romanian authorities decided to restructure the company and submit a restructuring plan to the European Commission, sent on 28 May 2021. The restructuring plan sets out a package of measures to streamline Tarom’s operations, renew the company’s ageing fleet and reduce costs. Romania intends to support the restructuring with public funding of around €190 million.

But last month, the European Commission announced that it had opened an investigation to assess whether the €190m state aid the Romanian authorities want to grant to Tarom airline complies with EU state aid rules.

Edited for English by: Service For Life SRL

Sursa foto: Facebook/Tarom

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