Rescue aid for Romanian flag-carrier Tarom, amounting to nearly €37 million, has been cleared by European Commission regulators.
The Romanian government had previously indicated that it was aiming to support the ailing operator with a funding package, and notified regulators earlier this month.
Tarom faces an “acute liquidity shortage” arising from operating costs associated with its ageing fleet, says the Commission.
“Absent the aid, Tarom will no longer be able to fulfil its payment obligations while keeping operations running,” it adds.
Tarom’s funding will take the form of a temporary loan.
“The measure will contribute to ensuring the orderly continuation of air transport services, in particular on numerous routes where Tarom is the only provider,” the Commission states.
It says the loan will only cover the airline’s demonstrated liquidity needs for the next six months.
Romania’s government will conduct “stringent monitoring”, says the Commission, to check how the funds are distributed.
The Commission adds that the government has committed to ensuring full repayment of the loan after the six-month period.
If this fails, Tarom will either be required to submit a liquidation plan or undergo extensive restructuring – with Commission approval – to become sustainable.
Tarom recently started modernising its turboprop fleet with the initial delivery from a batch of leased ATR 72-600s.
The Commission’s clearance of the state aid will avoid disruption to passengers and help maintain services.
“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,” it adds.
Romania’s Timisoara airport has also benefited from a positive Commission verdict on public funding which was granted to the facility over 2007-09.
Regional carrier Carpatair had formally complained about the funding and other measures in favour of the airport and budget operator Wizz Air, prompting an in-depth probe by the Commission in 2011.
But the Commission says certain public funds were used either to finance non-economic activities or did not grant any economic advantage to the airport, and consequently did not constitute state aid.
Discounts and rebates applied to all airlines at the airport, it adds, and were not selective, while agreements with Wizz Air were profitable and would have been concluded by a “prudent” market-economy operator.