LAM: Fly Modern Ark’s financial ‘success’ obtained via ‘confidential financial gymnastics’ – A Verdade

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LAM: Fly Modern Ark’s financial ‘success’ obtained via ‘confidential financial gymnastics’ – A Verdade

5:19 CAT | 31 May 2023

Photo: A Verdade

Continuing the attestation of incompetence that Minister Mateus Magala passed on Mozambicans working in Linhas Aéreas de Moçambique (LAM – Mozambique Airlines), Fly Modern Ark – a solution arranged to keep the company flying without privatisation or further financial restructuring and investment by its main shareholder, the Mozambican state – has announced one financial success, achieved in just one month: “The debt position was reduced by US$47.3 million dollars”.

But @Verdade has learned that this figure, which was partly obtained through “confidential financial gymnastics’ ‘, does not remove LAM from the situation of technical bankruptcy in which it has been since 2015.

The “Mozambican managers” of the South African company which has been managing LAM since April 18 of this year revealed that, in about one month, Fly Moden Ark had managed to reduce “the debt position by US$47.3 million, thus reaching a debt/equity ratio of less than one, and therefore LAM is no longer considered technically insolvent. Fly Modern Ark [also] suspended all credit terms on ticket sales, which increased sales revenue by 15 percent”.

Sérgio Matos, who this Monday (29) conducted the press conference in the stead of a South African representative “who had problems with his flight”, explained that the US$47.3 million was obtained without any “injection on the part of the government (…) came from the collection of some customers who had not paid [their accounts] for a long time. Some we intervened with a little aggressively, and we managed a good recovery of value for the company”.

In reply to @Verdade questioning, the manager of Fly Modern Ark clarified that LAM had debts of US$60 million. “So far, we have collected from various parties, including government and private parties, the amount of US$23 million, the other US$20 million were ‘financial gymnastics’ that were carried out, but I will not say that because it implies a breach of confidentiality of our contract”.

Contradicting the statements of the Minister of Transport and Communications, Mateus Magala, in the Assembly of the Republic, Sérgio Matos, a young Frelimo party apparatchik, admitted that “Fly Modern Ark will have its gains, yes, but unfortunately I will not be able to reveal the numbers here, because the contract with the government foresees confidentiality”.

Last year, LAM director general João Carlos Pó Jorge said in an interview with @Verdade that an amount identical to the one raised by Fly Modern Ark represented only the cost of servicing the company’s debts to domestic banks.

Keeping LAM flying without state shareholder carrying out restructuring and investments

The Mozambican manager of the South African company also announced that, to balance the ratio of LAM workers per operational aircraft, which currently stands at 115 employees per aircraft, “Fly Modern Ark is working to bring its aircraft, in fact it is one of the things that are also included in our contract, to bring planes and some capital to be able to leverage the LAM business. If everything goes well, in two or three weeks we will have two more aircraft in Maputo, and the others we will do in stages, until we reach 14 to 15 aircraft”. “Fly Modern Ark has partners who will bring (the planes); the idea is to share profits instead of renting.”

@Verdade newspaper understands that this is the solution found by Minister Magala, who took over Transport and Communications less than a year ago, which aims to ensure new aircraft for LAM, fundamentally to ensure domestic and regional routes without the state, its main shareholder, having to pay off the company’s debts of around US$350 million and invest another US$100 million in fleet growth.

In prospect is accelerated growth in domestic and regional air traffic over the coming months as a result of the resumption of the billion-dollar Mozambique LNG project led by oil company TotalEnergies.

Source: A Verdade