Romanian State Owned Airliner TAROM Initiates Restructuring Process

Romanian state owned airline company TAROM announced in a press release the beginning of the restructuring process. At the end of the next 6 months, the company expects to reduce the staff number such as to get 8 million USD in savings on an annual basis.

The measure was asked by the European Commission when it agreed to approve TAROM a state-guaranteed loan. In fact, both Romanian airliners, TAROM and Blue Air, are to get 64 and 60 million EUR, respectively, in state-guaranteed loans.

In July last year, the Romanian minister of Transport expressed his concerns regarding the necessity of an immediate initiation of the restructuring process:

The restructuring plan is mandatory. It is the last chance to use this opportunity to clean this company. We have 25 employees for each airplane, more than the average of the airline companies across the world. We have a manager for 9 employees, which is not right. There are 192 managers in the company.

Romanian minister of Transport, July 2020, on TAROM restructuring

TAROM has 192 managers and more than 1,900 employees, but that doesn’t mean all these managers and executive staff are indispensable to the company. In fact, by looking at the company’s profit and loss, we can notice the involution of the company’s profit rate over the last 13 years.

2007 was the last year when TAROM was on profit. In 2019 the company had a loss of more than 36 million EUR. Of course, 8 million EUR means a lot, if the company will succeed in its restructuring attempt and save this sum after the lay-offs. But still, TAROM needs to get back on profit by getting more clients, by more attractive offers, by cutting unnecessary bonuses for the management and by avoiding unnecessary expenditures. And for that, the restructuring of the personnel is not enough.

TAROM has the potential of recovering from this very difficult period. Before pandemic, TAROM used to fly safely to the destinations almost 3 million passengers a year. It’s clear those days are long gone, but with a proper management, with attractive offers and with courage for taking the necessary measures, TAROM could get back on profit sooner than any prediction.