Abstract Summary of European Privatisation Article

*This article was originally published on Juridice by Marian Dinu and Sandra Cahu on 14 May 2026. You can access it here.

The article entitled “Privatizarea liniilor aeriene din Europa. Vine și rândul TAROM?” (Privatisation of Airlines in Europe: Is It TAROM’s Turn?), authored by Marian Dinu and Sandra Cahu, presents a comprehensive legal and economic analysis of the privatisation of state-owned airlines across Europe over the past four decades, with particular focus on its implications for TAROM, the Romanian national carrier and one of the last remaining state-owned airlines in Europe. The article examines the structural transformation of European civil aviation from the state monopolies of the 1970s and 1980s through to the present-day consolidation under major private airline groups, driven by regulatory liberalisation, low-cost carrier competition, and European Union state aid rules. Its central thesis is that TAROM faces an imminent and binding constraint — the “one time, last time” principle under EU restructuring aid rules — which compels Romania to take a definitive strategic decision regarding the airline’s ownership structure within a narrow timeframe, or risk the airline’s liquidation.

The article opens with an examination of successful privatisations in Western Europe. British Airways is presented as the paradigmatic model: a heavily indebted, overstaffed carrier that underwent radical restructuring under Sir John King from 1981, reducing staff from approximately 60,000 to 39,000, before a highly successful initial public offering in February 1987 that was oversubscribed approximately eleven-fold. The British Airways experience demonstrated the critical principle that thorough operational restructuring must precede, rather than follow, a listing — a lesson the author considers directly applicable to TAROM. Air France is examined as an alternative model, whereby partial privatisation in 1999 was followed by full privatisation through merger with KLM Royal Dutch Airlines in 2004, effected by means of a public exchange offer on Euronext Paris, Amsterdam, and the New York Stock Exchange. The French state’s shareholding was diluted from 54.4% to 44% at merger completion and subsequently reduced to approximately 14.3% by 2019, before rising again to 28.6% during the COVID-19 crisis. Air France’s six consecutive years of profitability prior to the KLM merger demonstrated that restructuring under public ownership can successfully precede a transition to private ownership. Iberia’s gradual privatisation, completed in 2001, and its subsequent merger with British Airways under International Airlines Group in January 2011, is another example of the “umbrella merger” structure permitting retention of separate brand identities whilst combining operational networks and resources.

The article then addresses major failures. The collapse of Swissair in October 2001 — once considered Switzerland’s “flying bank” — is attributed to an aggressive debt-financed acquisition strategy (the “Hunter Strategy” devised with McKinsey & Co.), which resulted in losses of approximately 2.9 billion Swiss francs in 2000 and cumulative group debts of some 17 billion Swiss francs. From a legal perspective, the Swissair case illustrates the dangers of acquisition-led growth financed by debt absent rigorous due diligence and adequate risk controls. Alitalia is characterised as the longest and most costly failure of the state-ownership model in European aviation, with the Italian state injecting billions of euros over decades without achieving long-term viability, culminating in the cessation of all operations on 14 October 2021 and the launch of successor ITA Airways the following day. The European Commission’s approval in July 2024 of Lufthansa’s acquisition of a 41% stake in ITA Airways for USD325 million, subject to slot divestiture remedies, is noted as a significant recent transaction.

A substantial portion of the article addresses the ongoing consolidation of the European airline market through mergers and acquisitions. The Lufthansa Group’s systematic strategy of acquisitions in Central Europe — integrating Swiss International Air Lines, Austrian Airlines, and ITA Airways — is examined, together with the European Commission’s standard approach to merger control in the aviation sector, involving analysis of route overlaps and imposition of structural remedies. The current competition for the reprivatisation of a 44.9% stake in TAP Air Portugal, with non-binding offers submitted by Air France-KLM and Lufthansa Group in April 2026, is cited as evidence that consolidation continues and presents a potential window of opportunity for Romania.

The emergence of low-cost carriers — Ryanair, easyJet, and Wizz Air — following the EU’s three liberalisation packages (1987, 1990, and 1992) is identified as a decisive structural factor. Low-cost operators now represent approximately 35% of all flights to European airports and dominate the short-haul and medium-haul segments, effectively eliminating the market segment upon which small state carriers such as TAROM historically depended.

The case of Malév Hungarian Airlines, which ceased operations in February 2012 following European Commission Decision SA.30584 declaring state aid illegal and ordering recovery of approximately USD340–350 million, is presented as the most directly relevant precedent for TAROM given the structural similarities between the two carriers. The Commission found that Hungary had breached the “one time, last time” principle through successive rounds of financing without a coherent restructuring plan.

Turning to TAROM’s specific situation, the article documents near-continuous losses since 2008, with the sole exception of 2024 (achieved through asset sales), and a loss of USD30 million by August 2025 against a planned profit of USD5 million. The applicable legal framework is analysed in detail: Romanian privatisation legislation (Law No. 137/2002, Government Emergency Ordinance No. 88/1997, and Government Emergency Ordinance No. 109/2011); EU state aid rules under Articles 107–108 TFEU; the EU Merger Regulation (Regulation (EC) No. 139/2004); and Regulation (EC) No. 1008/2008, which requires Community air carriers to be majority-owned and effectively controlled by EU/EEA Member States or nationals, thereby restricting sales to non-EU investors.

The article concludes that the optimal scenario, from both a legal and economic perspective, would be a full privatisation preceded by genuine restructuring, with transfer of management and integration into a major airline group on the model of ITA Airways/Lufthansa. However, the author acknowledges that the political will and execution quality required have been demonstrated in the recent history of Romania’s state-owned enterprise sector. The overarching recommendation is that Romania must avoid replicating Hungary’s error of perpetuating a non-viable model through successive public subsidies within a European framework that no longer tolerates such practices, and that the time remaining for a structural decision is strictly limited.