LAM financial crisis endangers Mozambique Airports – AIM report

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LAM financial crisis endangers Mozambique Airports – AIM report

7:53 CAT | 13 Jun 2025

FILE - For illustration purposes only. [File photo: Folha de Maputo]

The anti-corruption NGO, the Centre for Public Integrity (CIP), has warned that the current financial crisis in the publicly-owned Mozambique Airlines (LAM) is also endangering the Mozambique Airports company (AdM), as a result of the “deep relationship of dependence.”

According to CIP’s research, the “deeply dependent relationship” between the two companies may jeopardize the “stability of the civil aviation sector and amplify the fiscal risks assumed by the Mozambican state.”

“LAM is responsible for more than 40 percent of the country’s airport revenues, but its inability to convert its contribution into cash is affecting the treasury of Mozambique Airports, constituting a serious risk factor for the survival of the national airport company”, says CIP.

In 2023, for example, LAM’s debt exceeded 4.8 billion meticais (75.1 million dollars at the current exchange rate), of which 2.6 billion meticais (31,3 million dollars) was considered irrecoverable, due to systematic defaults, reads the report. CIP fears that any reduction in the number of flights or worsening of the airline’s financial situation significantly compromises AdM’s ability to generate sufficient revenue to cover its operating costs and honour its financial obligations, “even if it maintains efficient internal management.”

“The situation is worsened by the fact that the Mozambique Airports Company has chronic structural weaknesses. By the end of 2023, for example, it had negative equity, estimated at 1.2 billion meticais, and has accumulated losses of more than 18 billion meticais, which means it was technically bankrupt”, CIP reported.

“The company’s fragility is further aggravated by investments in unprofitable airport infrastructures that jeopardize its financial sustainability. Nacala International Airport, in the northern province of Nampula, stands out as one of the most costly investments. That airport is economically non-viable, with operating losses of over 632.2 million meticais per year. Filipe Jacinto Nyusi Airport, in the southern province of Gaza, is another example, having accumulated losses of 294.0 million meticais in its first two years of operation, 2021 and 2022”, the research explains.

The analysis adds that, by 2023, the total debt of Mozambique Airports amounted to 18.2 billion meticais, of which around 9.6 billion was related to the construction and maintenance of Nacala Airport, 57.8 percent of which is covered by state guarantees.

Nacala airport was inaugurated by the then President, Armando Guebuza, in 2014 – but it was only built because of bribery. Mozambique’s Central Office for the Fight against Corruption (GCCC) announced in 2022 that it was bringing corruption charges against former Finance Minister, Manuel Chang, in connection with bribes paid by the Brazilian construction company, Odebrecht, to secure the contract for building an international airport at Nacala.

A statement from the GCCC said that press reports in 2017 had alerted it to “undue payments” (the polite term for bribes) made by Odebrecht. These payments were in connection, not only with the Nacala Industrial Free Zone (which includes the airport), but also the building of a new coal terminal in the port of Beira.

The subsequent GCCC investigations led it to issue four arrest warrants – two of these were for former ministers, including Chang. Chang was formally charged with corruption, illicit participation in business, abuse of his office, and money laundering.

The GCCC did not state how much Odebrecht paid in bribes. But an investigation into Odebrecht by the US Department of Justice concluded that the bribes paid in Mozambique amounted to 900,000 dollars.

No date has been set for a trial for Chang. No doubt this is because he is already serving a prison sentence in New York in connection with a completely separate case, that of Mozambique’s “hidden debts”. This is the scandal of over two billon dollars in loans obtained by three fraudulent Mozambican companies from the banks Credit Suisse and VTB of Russia in 2013 and 2014. The money was only lent because the Mozambican government, in the person of Manuel Chang, issued illicit loan guarantees, in violation of the budget law and of the Mozambican constitution.

Nacala Airport proved an expensive folly. The only air company with scheduled flights to Nacala is LAM. Back in 2014, it was claimed that half a million passengers a year would use Nacala. But no research had been done into whether such an airport was needed, or whether any international air companies wanted to fly to Nacala. The idea that airlines based in the Gulf would use Nacala as a hub for their African operations proved sorely misplaced.

As for the Filipe Jacinto Nyusi airport, this may have seemed a good idea because it was paid for by a Chinese grant of 75 million dollars. In theory, 220,000 passengers a year could use the airport. In reality, the only regular flights are from LAM, and no other airlines have shown an interest in using it.

“Analysis of the main financial ratios shows an alarming situation”, says the CIP analysis. “By the end of 2023, Mozambique Airports current liquidity ratio stood at 0.43, significantly below the minimum recommended value of 1.5, which indicates that the company doesnot have sufficient liquid assets to meet its short-term obligations”.

In order to reverse the situation, CIP recommends a thorough restructuring of the company’s operating model, with priority given to diversifying sources of revenue, “which means opening national airspace to new operators, both domestic and foreign, as a way of reducing structural dependence on LAM and mitigating the financial and fiscal risks currently borne by the state.”

“In the absence of these reforms”, the analysis points out, “Mozambique Airports will continue to represent a high fiscal risk for the state, restricting the fiscal space available for the state to channel resources to priority social sectors”.

Recently, as part of the attempts to revive LAM, the government hired a consultancy company, Knighthood Global, to lead the company’s restructuring process. According to a report in Thursday’s issue of the independent newssheet “Mediafax”, Knighthood Global, on the instructions of the LAM shareholders, is currently heading a drive to acquire five Boeing 737-700 aircraft for LAM.

Source: AIM