The Senate has rejected the provisions of the emergency ordinances, approved by the Government, through which a 300 million RON loan is granted to the low-cost airline Blue Air.
Both the chairman of the budget committee, Senator Viorel Arcaș, and Senator Eugen Teodorovici, a committee member and former Finance Minister, stated that they believe it is not normal for the Government to grant a loan to a private company that is a direct competitor of the national airline Tarom.
The conditions for granting the loan were established by a previous ordinance, which is in force. Furthermore, the Government approved, a week prior, the decision regarding the granting of the state guarantee related to the 300 million RON loan by EximBank for the low-cost airline Blue Air.
For Blue Air Aviation S.A., the Ministry of Public Finance was authorized to guarantee, in the name and on behalf of the state, 100% of one or more loans, as well as the related interest and commissions, within the limit of 300,775,000 RON, for a period of up to 6 years, as state aid and rescue aid, with the contracting of the loan(s) to be carried out by October 31, 2020, and the disbursement of funds to the company to be carried out by January 31, 2021.
Additionally, the European Commission authorized the measure of granting aid in the form of a state guarantee covering 100% of the loan.
According to an official assessment, however, there is significant uncertainty regarding the ability of the low-cost airline Blue Air to continue its activity and a high risk of not honoring its financial obligations, as the company currently meets the legal requirements to be classified as an enterprise in difficulty.
During the debate on this ordinance, the Senate Committee on European Affairs had proposed canceling the loan for Blue Air, but the draft ordinance was tacitly adopted by the Senate due to the expiration of the debate deadline.
The rejection of the loan under these conditions would have also been proposed by the budget committee, according to Senator Eugen Teodorovici, but the transport committee did not prepare the report on the ordinance in time.
Furthermore, Senator Teodorovici claimed that the Government did not support the idea that Blue Air’s economic difficulties arose with the COVID-19 pandemic, and the established guarantees, such as land and forests belonging to the company’s shareholders, are not sufficient to compensate for the value of the loan.
The former Finance Minister points out that the Government should have provided, in the issued normative acts, for the explicit takeover of the company by the state in case of non-repayment of the credit.
The cancellation of the provisions related to Blue Air was adopted by the Senate plenary, through the majority vote of the PSD, with USR and even PNL abstaining from voting on the report. The ordinance, which is otherwise in force, modified in this way, will now be sent for debate to the Chamber of Deputies, where the initial ordinance regarding the granting of the loan is still in the debate process.
Deputies in the industry committee gave a positive opinion on the initial conditions of the loan, but the reporting committees are those for budget and transport.
Frequently Asked Questions
Why did the Senate block the Blue Air loan?Senators argued that it is inappropriate for the state to fund a private competitor of the national carrier Tarom, while also questioning the adequacy of the provided guarantees.
What is the value of the proposed state aid?The amount involved is 300 million RON, in the form of a loan with a 100% state guarantee, initially approved by the Government and the European Commission.
Is this Senate decision final?No, the bill now moves to the Chamber of Deputies, which serves as the decision-making body in this matter.