Three and a half years from the appointment of the first private sector chief executive officer to run a state-owned company – Christian Heinzmann at Tarom, the results show the experiment failed: more than 20 private sector members were appointed to the board one after another, the company paid EUR300,000 as compensation for the first five private sector directors that sued it and the business targets – making profit and boosting the number of passengers by 2015 were not reached.
On Monday evening, the Transport Ministry’s control body announced the conclusions of its investigation, revealing that Tarom’s cancelled or delayed flights led to lower operating revenue and to payment of about $1 million as compensation.
The report also shows failure to comply with certain stipulations of the labor code (there is no clear record of the working hours of the employees for instance), wage policy problems, and the chief executive commissioned two outside audit services without using the results thereof in a plan of concrete measures.
The first to discuss the failure of the project was analyst Ionel Blanculescu, who warned about such danger in 2011. Today he says all projects to introduce private sector management at state-run companies are failures, because all the private sector executives and directors that left these companies ‘left with their tail between their legs’.
“Private sector management of state-run companies will never work, because there are two different civilizations here, one looking at profit and market share and the other not just at profit but also over the citizens’ best interest. This project definitely has to end,” Blanculescu said.
The worst solution the Transport Ministry could choose now is to have a new private sector management team installed at Tarom, he added.
On the other hand, entrepreneur Marius Ghenea, who was part of the first team of private sector executives to serve on Tarom’s board (along with Dan Pascariu, Valentin Macec, Ciprian Ladunca and Dumitru Prunariu), says that during his short term, the company halved losses in less than one year, and did that while the oil price was at its highest.
“Aside from figures, the company started to have a proper and modern corporate governance for the first time in its history, like private companies of the same size do, many of the management problems were fixed, a personnel cutback program was started without resorting to layoffs, which did not continue, as was a fleet harmonization program (which did not continue, either),” Marius Ghenea said.
The situation at Tarom is a successful demonstration by the political scene that such a project cannot possibly work, he added.
On the other hand, Christian Heinzmann says he successfully cut the airline’s losses, but was unable to go ahead with the restructuring because the collective employment contract. He also failed to turn the company around in 2015 and boost passenger traffic by 100,000 people as promised when he took the job. If he leaves early, he gets an EUR60,000 exit package, Heinzmann said.
“This wasn’t the time for changes at Tarom, considering the powerful competition on the market, Ryanair, Wizz Air and Blue Air’s push into domestic flights,” Heinzmann said.
Tarom needs continuity, what is going on now is not good for the company, he added.
Tarom posted about EUR313 million revenue in 2015, an increase of 25% on 2014 and 27% on 2013, as well as EUR9.3 million losses (2.9 times lower than in 2014 and 3.1 times lower than in 2013).
The first private sector directors of Tarom sued the company for having been removed from their positions and won, getting EUR300,000 compensations together (EUR60,000 each).
(English version by Loredana Fratila-Cristescu)