The Court of Justice of the European Union (ECJ) said in a ruling published on January 11 that the European Commission was right to allow Romania’s state aid to state-owned carrier TAROM (RO, Bucharest Henri Coanda) in early 2020, thus dismissing Wizz Air’s appeal to a previous General Court ruling.

Romania granted its troubled carrier RON175,952,000 Romanian lei (circa USD40,000,000 at the time) in what it called a loan in February 2020 and the European Commission (EC) approved the move and classified it as state aid compatible with the internal market. At the time, it recognized that the financial situation of the airline had severely deteriorated over the previous five years and that TAROM had accumulated losses from 2004 to 2019 in the amount of RON3,362,130,000 (circa USD740,000,000) which exceeded its capital.

Rival Wizz Air (W6, Budapest) had appealed the decision, claiming, among other things, that the EC was wrong to recognize TAROM’s domestic flights as a service that is hard to replicate.

“The Court reaffirms that the relatively limited size of the market at issue does not prevent a service provided on that market from being classified as important so that its disruption could give rise to serious social hardship or constitute market failure. This would be the case if TAROM were to cease operations: it would be detrimental to the connectivity of the regions in Romania exclusively served by that airline and to the economic situation of those regions,” the ECJ said in a statement.

Additionally, the ECJ noted that it refutes “Wizz Air’s arguments as to whether TAROM would be replaced by its competitors on the domestic routes operated exclusively by that airline, the repeated grant of State subsidies to TAROM and all the other legal grounds put forward by Wizz Air.”

TAROM has been in financial trouble for years. Publicly available reports show that it had a net loss in 2022 of RON274,607,571 (USD58,683,637 at the time) whereas it had a net loss of RON50,290,930 (USD11,083,708) in the first six months of 2023. The state-owned airline was last profitable in 2008 and government estimates from June last year show that TAROM was expected to finish 2023 with a loss of RON64,000,000 (USD14,149,153).

The Romanian airline is undergoing restructuring efforts that are yet to be approved by the EC. In early January, the company’s board of directors named Costin Iordache general manager amid numerous changes at the carrier aimed at revitalizing it. As ch-aviation reported earlier, according to the plan, TAROM is supposed to become a smaller company and return to profitability by 2026 despite previous government estimates expecting a return to profitability this year. In the meantime, the state-backed airline faces numerous difficulties as Iasi Airport sues it over debts and reports say the company isn’t able to repay a bank loan from 2020.