February 24 (SeeNews) - The European Commission said on Monday it has approved, under EU state aid rules, Romania's plans to grant a loan of some 36.7 million euro ($38.9 million) to state-owned flag carrier Tarom for up to six months.
The measure will contribute to ensuring the orderly continuation of air transport services, in particular on the numerous routes where Tarom is the only provider, and avoid disruptions for passengers, without unduly distorting competition in the single market, the European Commission said in a press release.
"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," the Commission said.
In February 2020, Romania notified the Commission of its intention to grant a rescue loan of around 36.7 million euro, or some 176 million lei, to Tarom.
"The airline faces an acute liquidity shortage, due to the steep increase in operating costs generated by its ageing fleet over the last years. Absent the aid, TAROM will no longer be able to fulfil its payment obligations while keeping operations running," the EU's executive body said.
Romania committed to ensure that, after six months, the loan will be fully repaid, or Tarom will either submit a liquidation plan or carry out a comprehensive restructuring in order to become viable in the long term. Such possible restructuring would be subject to the Commission's assessment and approval.
Tarom is operating on international and domestic routes with a fleet of 25 aircraft - seven ATR-42-500, two ATR-72, 4 Boeing 737-700, 4 Boeing 737-300, 4 Boeing 737-800 NG, and 4 Airbus A318-111.
Tarom narrowed its net loss to 171.4 million lei ($39 million/ 36 million euro) last year, from 182.7 million lei in 2018. Tarom's 2019 turnover is estimated at 1.51 billion lei, up from 1.4 billion lei in 2018, according to preliminary data published by the company in Romania's official gazette.
Last year was Tarom's 12th straight year of annual loss.
($= 0.9244 euro)