State aid: European Commission approves €19.3 million Romanian loan guarantee to compensate TAROM for damage suffered due to the coronavirus outbreak

The European Commission has approved, under EU State aid rules, a loan guarantee of up to around €19.3 million (approximately RON 94 million) in favour of the Romanian state-owned airline TAROM.

The measure aims to compensate the airline for the losses directly caused by the coronavirus outbreak and the travel restrictions introduced by Romania and other destination countries to limit the spread of the coronavirus in the period between 16 March 2020 and 30 June 2020. This has forced Tarom to cancel most of its scheduled flights and caused major losses in turnover.

The public support will take the form of guarantee to market loan(s).  The Commission assessed the measure under Article 107(2)(b) of the Treaty on the Functioning of the European Union (TFEU), which enables the Commission to approve State aid measures granted by Member States to compensate specific companies or specific sectors (in the form of schemes) for the damages directly caused by exceptional occurrences, such as the coronavirus outbreak. The Commission found in particular that the Romanian measure will compensate damage that is directly linked to the coronavirus outbreak.

An independent external audit firm will verify that the aid does not exceed the amount of damage suffered during the period between 16 March and 30 June 2020. Following the audit, any public support received by TAROM in excess of the actual damage suffered will have to be returned to Romania. The risk of overcompensation is therefore excluded.

The Commission also found that the measure is proportionate as the compensation does not exceed what is necessary to make good the damage. On this basis, the Commission concluded that the Romanian measure is in line with EU State aid rules.