The General Court of the European Union has “dismissed in its entirety” an action that Wizz Air (W6, Budapest) lodged last year against Romanian flag carrier TAROM (RO, Bucharest Henri Coanda) receiving EUR36.66 million euros (USD38.76 million) in state aid shortly before the outbreak of the Covid-19 pandemic.
The bailout, which European Commission competition regulators had already cleared on February 24, 2020, “is compatible with the internal market as it aims to prevent the social hardship that a disruption of Tarom’s services might cause for the connectivity of regions in Romania,” the court said in its May 4 ruling.
The aid had consisted of a loan to cover its liquidity needs over the ensuing six months, while Bucharest promised to carry out “stringent monitoring” of how the funds were used.
Wizz Air tried to annul the commission’s decision by suggesting that the aid broke two conditions - on the contribution of the aid measure to an objective of common interest, and the condition that Tarom should not have received rescue and restructuring aid before. These doubts, it said, should have led the authority to initiate a formal investigation procedure.
According to the court, although the European Union member state in question must demonstrate that the aid aims to prevent social hardship or address market failure, “it is not required to establish that in the absence of the aid measure certain negative consequences would necessarily arise, but only that such consequences might arise.”
The commission was right to see this as a risk, the court added, “taking into account the poor condition of Romanian road and rail infrastructure.”
The court also ruled that under the guidelines on state aid, additional assistance could be allowed if at least ten years had elapsed from earlier restructuring - and this was the case for Tarom, where “aid had been granted between 1997 and 2003 and all the loan guarantees had been called immediately after they had been granted.” The court rejected the applicant’s argument that because this aid approved in 1997-2003 was implemented up to 2019 meant that the restructuring plan linked to that aid also lasted up to 2019.
The General Court judgement was issued on the same day, May 4, that the European Commission approved a fresh EUR1.9 million (USD2 million) Romanian state aid package for Tarom, this time to offset financial losses it had sustained during the second half of 2020.
