TAROM S.A.

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TAROM S.A.

Otopeni Airport, Soseaua Bucuresti
Ploiesti Km 16.5
Ploiesti
Romania
Telephone: ( +40) 21 201 4700
Fax: ( +40) 21 201 4761
Web site: http://www.tarom.ro

State-Owned Company
Incorporated: 1954 as TAROM—Transporturile Aeriene Române
Employees: 2,608
Sales: $245 million (2004 est.)
NAIC: 481111 Scheduled Passenger Air Transportation; 481112 Scheduled Freight Air Transportation; 481212 Nonscheduled Chartered Freight Air Transportation; 481211 Nonscheduled Chartered Passenger Air Transportation; 488119 Other Airport Operations; 488190 Other Support Activities for Air Transportation

TAROM S.A. is the national airline of Romania. It is majority owned (92.63 percent) by the government's Ministry of Transportation, which has long held plans to partially privatize the carrier. Other shareholders are ROMATSA (Romanian Air Traffic; 5.42 percent), the "Muntenia" Private Financial Investment Fund (1.43 percent), and the Romanian Civil Aviation Authority (0.52 percent). The airline flies to about three dozen scheduled destinations, provides charter flights, and operates a fleet of 16 aircraft. TAROM'S offerings focus on Europe and the Middle East. The airline brings in intercontinental traffic with its code share partners, which include Alitalia, Air France, Aeroflot, Austrian Airlines, CSA Czech Airlines, Lot Polish Airlines, Malev, Syrian Arab Airlines, Iberia, and Cimber.

Origins

Transporturile Aeriene Române, or TAROM, was founded on September 18, 1954, when the state of Romania bought out the Soviet Union's 50 percent stake in TARS (Transporuri Aeriene Romana Sovietica). TARS had been formed in 1946 to take over the interests of LARES, a state-owned airline that had operated in Romania before World War II.

Romania's airline business dated back to the French-Romanian Company for Air Navigation (CFRNA), formed in 1920. Using POTEZ aircraft from France, CFRNA was billed as the world's first transcontinental airline, with a route extending from Bucharest to Paris via Strasbourg, Prague, Vienna, and Budapest.

CFRNA was renamed CIDNA, "The International Air Navigation Company" in 1927. LARES was established within three years, and merged with SARTA (The Romanian Air Transport Society Ltd.) in 1937.

TAROM expanded its route network throughout Europe in the 1960s, and in 1966 conducted its first transatlantic flight. Use of British-made BAC One-Elevens powered by Rolls-Royce engines gave TAROM a selling point in London, which was a three-hour flight from Bucharest. Scheduled flights to New York and Beijing began in 1974. Resorts on the Black Sea and Carpathian Mountains attracted tourists from both sides of the Iron Curtain.

Traffic Drops in 1980s

Tourism to Romania fell dramatically from a mid-1970s peak to new lows in the 1980s. Besides scaring away foreign tourists, the communist regime of dictator Nicolae Ceausescu also made it nearly impossible for Romanian citizens to travel outside the country. Nevertheless, TAROM managed a profit of $78 million in 1988, one company official told the Chicago Tribune. The airline was carrying more than three million passengers a year.

TAROM ended the 1980s with 65 planes, most of them Soviet in origin and fewer than half of them airworthy. Twin-engine Antonov An-24 turboprops and the four-engine Ilyushin Il-18s were its workhorses. The airline had 4,000 employees, reported Aviation Week & Space Technology.

The overthrow and execution of Ceausescu in December 1989 marked the end of an era for TAROM as well as for Romania. The airline was now at liberty to acquire more planes from the West. Tourist traffic also boomed. TAROM's charter business increased dramatically after the fall of Communism in Romania. The lifting of travel restrictions contributed to an overall 45 percent traffic increase in one year as Romanians were freed to take trips outside the country. They were especially eager to take trips to former Soviet Bloc territories, especially Moldavia, as well as venturing into the Free World.

Revamping in the 1990s

TAROM was reorganized as a joint stock company in 1991. The next year, the airline launched a catering joint venture, ABELA ROCAS, in cooperation with Casrom, the Otopeni Airport, and Albert Abela Corporation. TAROM also partnered with Lufthansa, TV-Rom International, and Anarom to form the Lufthansa-Tarom Airport Service (LUTAS) at Bucharest Airport. Avicon, established by Austrian Airlines and Swissair, was brought in to raise TAROM's level of service to Western standards.

TAROM began the 1990s with a mixed fleet of Soviet-made Ilyushin, Tupolev, and Antonov aircraft, as well as a handful of 1970s era Boeing 707s and 14 BAC One-Elevens produced in Romania under license. These older aircraft were soon to be banned from most Western countries due to pollution, noise, and safety issues. In this period, TAROM leased out some of its aircraft to other airlines to raise much-needed hard currency. TAROM later developed a specialty in third-party maintenance for ATR 42s and Boeing 737s.

The airline underwent a massive fleet renewal program in the 1990s. Three Airbus A310s were bought in 1992 (one of these crashed upon takeoff in March 1995). TAROM also took advantage of a depressed airliner market to order Boeing 737s.

While domestic fares were regulated and subsidized by the government, international routes provided the cash revenue that the airline needed to stay in business. (Not all long-haul flights were profitable, however.) TAROM's network of 39 destinations stretched as far as New York and Singapore, as well as coverage of the Middle East.

There was new competition in the mid-1990s from both established Western carriers expanding eastward and a few start-up airlines in Romania itself. One of them, DAC-Air, took over some of TAROM's domestic and regional routes using Dash 8 turboprops and Canadair regional jets in May 1996. TAROM acquired a holding in privately owned DAC in exchange for routes and use of its facilities and technologies.

Nevertheless, TAROM was losing money—$24 million in 1996. It had more than 3,300 employees, and the need to thin its staff would be a contentious issue throughout the late 1990s and beyond, resulting in tense negotiations with the unions and high turnover in the CEO position. The company also needed to cut back on the number of different types of aircraft it operated, then nine.

Passenger count exceeded one million in 1999, a new record. By this time, TAROM had added service to Chicago and Montreal. Bucharest was turning into something of a hub for travelers to the Middle East, which TAROM was serving with several new destinations. In addition, more European cities were added to the network. TAROM had marketing arrangements with Swissair, Alitalia, Austrian Airlines, and TWA.

Building Partnerships after 2000

The fleet was augmented in 2000 with the $100 million acquisition of six ATR 42 turboprops for regional and domestic flights. The airline also studied the possibility of using regional jets to bolster its feeder network. TAROM cancelled an order for four Boeing 737s in 2001. It placed another order for four medium-range Airbus A318s, worth $219.6 million, two years later.

To make visiting Romania easier for U.S. tourists, in 2002 the Romanian Tourism Ministry designated Austrian Airlines as its preferred carrier for travel from America, which TAROM no longer served directly. Other code share partners (Alitalia, Air France, Aeroflot, CSA Czech Airlines, Lot Polish Airlines, Malev, Syrian Arab Airlines, Iberia, and Cimber) helped bring in intercontinental traffic.

The airline cancelled its own long-haul flights in 2003. Those to Beijing were suspended in April due to the SARS epidemic; services to New York ceased in November. TAROM then sold the two Airbus 310 aircraft it had used to fly these routes for eleven years.

Company Perspectives:

Passenger satisfaction and comfort is the ultimate goal of any air carrier. At TAROM, special attention was paid to the quality of services and products. Punctuality and reliability are being enhanced in order to satisfy the passengers' expectations and requirements. Thus, complex measures were set in place, among which it is worth mentioning the improvement of the quality and the variety of food choices on all international flights.

Key Dates:

1954:
TAROM is founded.: 1974:
Flights to New York and Beijing begin.: 1989:
The fall of communist dictator Nicolae Ceausescu results in huge jump in demand for air transportation in Romania.: 1991:
TAROM is reorganized as a joint stock company.: 1999:
The company's passenger count exceeds one million.: 2003:
Long-haul flight operations cease.: 2004:
The company celebrates its 50th anniversary.

The idea of privatization, floated in the early 1990s, was still being discussed ten years later as the carrier continued to lose money. TAROM was planning to narrow losses from $14.5 million to $6 million in its fiftieth anniversary year, 2004, when turnover was expected to be $245 million. The company was aiming to post a profit by 2005 to attract investors in its planned privatization. According to Dow Jones Newswires, Central andEastern Europe was expected to see the greatest growth in air traffic during the decade, thanks in part to impending membership of countries in the region to the European Union.