The European Commission (EC) is launching an investigation into the bankruptcy of the Romanian low-cost airline Blue Air Aviation. In particular, Brussels will assess whether the support measures taken by Romania in favor of Blue Air Aviation, in particular the guarantees of a €34 million bailout loan extended in August 2020 and its renewal, comply with state aid rules. EU aid, reported G4media.ro.
The investigation will have to determine whether the ailing company was likely to become viable following the restructuring plan as notified to the Commission.
The Romanian state acquired a 75% stake in Blue Air in return for repayment of €62 million in bank loans previously guaranteed under state aid schemes. But instead of assets, the state ended up with more liabilities (about 200 million euros), which probably was not part of the restructuring plan, notes Romania Insider. Ultimately, the state filed for bankruptcy on the company in March 2023.
A European low-cost airline went bankrupt
The reason is debts of millions of euros
The investigation also assesses the support the target company receives from the free market (banks, other investors) as part of the restructuring plan and whether the support measures provided by the state distort competition in the market. Both elements are far from a classic state aid scheme.
In August 2020, the EC approved two public support measures for Blue Air, namely loan guarantees of €28 million to offset the effects generated by the Covid-19 crisis and a rescue loan of €34 million.
After six months, the state must either have reported the termination of the guarantees or drawn up a liquidation or comprehensive restructuring plan.
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In April 2021, Romania first notified the Commission of Blue Air’s restructuring plan for the period August 2020 – September 2025. The plan, updated several times, includes an extension of the bailout loan guarantee to six years, whereby way allows the aid to be disbursed until 2026, foresees restructuring measures and envisages private financing. In November 2022, the Romanian state accepted a 75% stake in Blue Air in exchange for loans guaranteed to the company.
Source: Blue Air
A flight on Blue Air
The bankruptcy
The Bucharest Tribunal accepted the company’s request for bankruptcy on March 21, according to an official announcement on the court’s website, cited by Finance newspaper.
Several names are on the list of creditors, including the Romanian Air Traffic Services Administration – ROMATSA, Air Claim, Avram Iancu International Airport in Cluj and several individuals.
Air Claim announced in early March that it had filed for bankruptcy proceedings against Blue Air, saying it still had €85,000 to recover from the airline.
Blue Air suspended flights in early September 2022 and has not been able to resume operations. The company said at the time that it was forced to take this decision after the local environment ministry blocked all of its bank accounts. According to Ziarul Financiar, the company accumulated debts of 230 million euros in September last year, which does not include the money it has to return to customers whose flights were canceled in the same month.
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We recall that at the time, the Romanian Consumer Protection Agency announced that it had notified the private airline of a fine of 10 million lei (2 million euros) issued for the flights canceled from June 15 to September. More specifically, more than 150,000 users from 23 member countries of the European Union were affected.
The president of Romania’s CZP, Horia Constantinescu, criticized the airline for running promotional campaigns despite the problems it is facing, Bursa.ro reported.
Blue Air is the largest Romanian airline by number of passengers carried, with an ultra-low-cost (ULC) business model and an approach focused on passenger needs.
The company operates Boeing 737 aircraft. In its 16 years of operation, Blue Air has carried more than 32 million passengers and flown over 340 million kilometers. The airline is IATA Operational Safety Audit (IOSA) certified by the International Air Transport Association (IATA) for outstanding operational standards and is a full member of IATA.
