Coronavirus

Romania seeks EUR 130 million financial rescue for Blue Air and TAROM

Air travel has come to a near-complete halt in Romania as incoming and outgoing flights to and from red areas, as well as internal flights, have been suspended. This has pushed air travel operators to the brink of bankruptcy if they don’t get urgent access to financial aid. To compensate for the losses generated by the coronavirus epidemic, the two Romanian operators, TAROM and Blue Air, may receive a rescue package totaling EUR 130 million from the European Commission, according to Minister of Transport Lucian Bode.

“We have opened discussions with the European Commission, and we are talking with the Competition Council, Ministry of Finance, and all state institutions responsible about the necessary procedure to ask for help to compensate for the effects of the pandemic,” Bode said in an interview with Realitatea Plus (via Ziare.com).

The government is asking for EUR 130 million in financial aid, so about EUR 65 million for each flight operator.

The European Commission has already approved Romania’s plans to provide state funding in the form of a temporary loan of EUR 36.7 million, as TAROM is facing an acute liquidity shortage

due to the steep increase in operating costs generated by its aging fleet. The aid, approved in late February, was needed for the carrier to fulfill its payment obligations to its suppliers. But the terms the government agreed to were strict, and the aid must be used to pay for the monthly leasing installments. The rescue aid was granted for six months during which time the company must repay the loan in full.

Now, the government has opened discussions with TAROM’s suppliers to rethink the leasing contracts it has for its Boeing and ATR aircraft units acquired in the past couple years, Bode added. The aim of the negotiations is to postpone the installments, but the measures won’t stop there. Some employees may be forced to enter technical unemployment as a solution to save the company from further financial losses, according to Bode.

As air traffic has dropped by 94%, Blue Air, the Romanian airline headquartered in Bucharest, is at risk of going bankrupt because of the COVID-19 pandemic.

The carrier has turned to the government for a rescue loan, as the flight restrictions have heavily cut into its profits. Roughly 90% of Blue Air’s employees are now in technical unemployment, and there is no known date for lifting flight restrictions. “Blue Air is in need of temporary financial aid in the form of a rescue loan,” the company wrote in a press release. Hotnews’s sources claim the carrier is seeking a EUR 45 million loan from the government.

“We are looking for solutions to this crisis and for the post-crisis period, but if we wait until the next 30 days of the state of emergency are over, it will be too late,” Bode said. Until then, the government is doing everything possible to make the most of TAROM’s fleet: It has transformed two of the Boeing aircraft into cargo planes, using them to bring cargo for pharmaceutical trading company Unifarm from China. It remains to be seen when the 15 airports in Romania will reopen to regular air traffic.

Title image: Blue Air aircraft. Image credit: ZF

Author: István Fekete