Debt of the Mozambican airline LAM fell by 2.4% in three months

A report on the evolution of Mozambique’s public debt indicates that LAM (Mozambique Airlines) experienced a nominal reduction of 144.6 million meticais (two million euros) compared to the first quarter of 2025, when its total domestic debt exceeded 6.033 million meticais (80.5 million euros).

LAM will be able to repay its accumulated debt in annual installments, which will be guaranteed by the State with commercial banks, as per the resolution permitting the transaction, approved on September 2 by the Council of Ministers.

The government announced that it had approved “the resolution authorizing the payment of LAM’s annual debt installments, guaranteed by the State with commercial banks,” though it did not disclose specific amounts.

In the same resolution, the government authorized the Instituto de Gestão das Participações do Estado (Igepe), which manages and coordinates the state’s business sector, to establish a vehicle with the specific purpose of managing and liquidating said debt.

Another resolution authorized the creation of a special purpose company owned by Hidroelétrica de Cahora Bassa (HCB), Portos e Caminhos de Ferro de Moçambique (CFM), Empresa Moçambicana de Seguros (Emose), and LAM shareholders, “with the main objective of securing funding to acquire the stake” in the airline.

This year, LAM significantly reduced its international flights, focusing on domestic connections, resulting in a new administration in May and the inclusion of HCB, CFM, and Emose as shareholders.

To address recurring flight cancellation issues, LAM plans to acquire five Boeing 737-700 aircraft. Meanwhile, it has initiated a tender to lease an additional five planes.

LAM’s losses soared to 3.977 million meticais (53.5 million euros) in 2023, prompting the State to inject one billion meticais (13.7 million euros) and issue a comfort letter in 2024, as reported on August 7.

The airline, which has not publicly disclosed its accounts, showed losses of 448.6 million meticais (six million euros) in 2022, escalating in the subsequent year, according to the most recent financial statements available.

The company has faced operational challenges for several years related to a limited fleet and lack of investment, with some non-fatal incidents linked by experts to inadequate aircraft maintenance. It is currently undergoing an extensive restructuring process.

Despite the accumulated losses that year, LAM’s service sales grew by 4% in 2023 compared to 2022, reaching 8.813 million meticais (118.7 million euros), according to the report, which noted the majority shareholder’s “commitment” to provide necessary resources for the company to “meet its obligations and commitments” to third parties, “through a comfort letter dated October 7, 2024,” issued by Igepe.

The report further stated that “considering the loss recorded” for “2023 and previous years,” the company closed that year with a negative equity of 19.670 million meticais (265 million euros), compared to 16.765 million meticais (225.8 million euros) in 2022, and with current assets “being less than current liabilities” amounting to approximately 18.641 million meticais (251 million euros), LAM’s continuation was at risk.

“Aware of this situation, the board of directors appealed through several exposures to the shareholders about the company’s condition and proposed measures, some short-term in nature, and other strategies to maintain the company’s sustainability,” the report said, adding that in 2023, the State “made supplementary contributions totaling 1.017.393.669 meticais (13.7 million euros).”