The Government announced today through the Council of Ministers that it has authorized “the resolution allowing the payment of the annual installments of the LAM debt, guaranteed by the State with commercial banks,” without disclosing the specific values involved.
The resolution also authorizes the State Participation Management Institute (Igepe), which manages and coordinates the State’s business sector, to establish a vehicle with the specific purpose of managing and settling the aforementioned debt.
Additionally, the resolution approved today authorizes the creation of a special-purpose entity owned by Cahora Bassa Hydroelectric (HCB), Ports and Railways of Mozambique (CFM), Mozambican Insurance Company (Emose), and LAM shareholders, “with the main objective of securing financing for acquiring the stake” in the airline.
The President of Mozambique, Daniel Chapo, stated on April 28 that there are “foxes and corrupt individuals” within LAM, with “conflicts of interest” that prevented the restructuring of the company in the first 100 days of governance, including the goal to acquire three aircraft in that period.
The crisis prompted the company to virtually cease international flights this year, focusing on internal routes, leading to a new administration in May and the entry of HCB, CFM, and Emose as shareholders.
To address the recurring issues with flight cancellations, the company plans to acquire five Boeing 737-700 aircraft and has initiated a tender to lease five more while awaiting this process.
Mozambican airline LAM’s losses soared to 3.977 billion meticais (53.5 million euros) in 2023, necessitating a state injection of one billion meticais (13.7 million euros) and the issuance of a comfort letter in 2024, as reported on August 7.
LAM, which has not publicly disclosed financial statements, recorded losses of 448.6 million meticais (six million euros) in 2022, which then surged the following year, according to the most recent financial statements available, which were accessed by the press.
The company has faced operational challenges for years, related to a small fleet and lack of investment, with several non-fatal incidents linked by specialists to poor aircraft maintenance. It is currently undergoing a significant restructuring process.
Despite accumulating losses under the management of South African firm Fly Modern Ark (FMA), LAM saw a 4% increase in service sales in 2023 compared to the previous year, reaching 8.813 billion meticais (118.7 million euros), according to the report.
The report states that LAM “obtained the commitment” from the majority shareholder “to provide the necessary resources” to enable the company “to meet its obligations and commitments” to third parties, “via a comfort letter dated October 7, 2024,” issued by Igepe.
The report adds that due to “the reported loss” in the 2023 fiscal year “and in previous years” and the company closing that year with negative equity of 19.670 billion meticais (265 million euros), against 16.765 billion meticais (225.8 million euros) in 2022, and current assets “being less than current liabilities” by approximately 18.641 billion meticais (251 million euros), the airline’s continuity was at risk.
“Aware of this situation, the board of directors appealed through various presentations to shareholders about the company’s situation, and proposed measures, some of a short-term nature and others strategic, to maintain the company’s sustainability,” the report reads, adding that in 2023 the State “provided supplementary contributions totaling 1.017,393,669 meticais [13.7 million euros]”.
