The European Commission announced today it is launching an investigation to assess whether the Government of Romania can provide state aid in line with EU rules to the country's flag carrier, TAROM. Romania wants to restructure TAROM and provide it with almost 200 million additional euros.

The EU launches an investigation

The European Commission has opened an in-depth investigation to assess whether proposals by the Government of Romania to provide state aid to its flag carrier, TAROM, are in line with EU rules.

The investigation is needed because TAROM has been struggling financially for years. Romania injected 36.7 million euros ($43.5 million) into TAROM through a loan in February 2020. Three months before this happened, Simple Flying examined the prospect that the European Commission may not grant its approval for this financial injection.

On top of the 36.7 million euros ($43.5 million) received in February 2020 for its pre-pandemic operational losses, TAROM also received a further 19,3 million euros ($23 million) of state aid from Romania for COVID-19 losses.

The several rounds of pre-COVID and COVID financial injections into the loss-making national airline have now prompted the European Commission to express the following stark remark regarding Romania's plans to provide more state aid for TAROM:

"The Commission has doubts that the proposed restructuring plan and the aid to support it satisfy the conditions of the Guidelines."

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What will the investigation examine?

The particularities that the European Commission will investigate are as follows:

• Firstly, whether the proposed restructuring plan is appropriate for addressing TAROM's present financial difficulties and whether it can restore its long-term viability in a reasonable time frame without continued state aid.

This particular point is the most challenging one for Romania to meet because TAROM was loss-making before COVID.

• Secondly, whether TAROM or market operators would sufficiently contribute to the restructuring costs, thus ensuring that the restructuring plan does not overly rely on public funding and that the aid is proportionate.

This particular point refers to TAROM's intention to minimize its operational losses through the proposed business restructuring. A fleet renewal that will see all of TAROM's Airbus A318 aircraft retired forms a part of this.

• Thirdly, the Commission will check whether appropriate measures to limit the distortions of competition created by the aid would accompany the restructuring plan.

If the European Commission is ultimately left satisfied that this restructuring plan will not distort competition, Ryanair will probably not be. The pan-European giant has launched numerous legal challenges to state aid packages in Europe this year, calling them unfair subsidies.

What are EU state aid rules?

The European Commission's guidelines on rescue aid for businesses enabled EU member states to support companies in difficulty under a set of strict rules.

Member states that wish to support companies financially beyond an initial period of six months must present a plan to the European Commission, which will then approve or reject the plan based on whether it thinks that the company can remain operational without state aid in the future.

Do you think the European Commission will ultimately be in favor of state aid for TAROM? Let us know what you think of this story in the comments below.