Mozambique: Flag carrier LAM was carrying less debt than reported due to ‘oversight’

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Mozambique: Flag carrier LAM was carrying less debt than reported due to ‘oversight’

8:09 CAT | 01 Jun 2023

FILE - For illustration purposes only. [File photo: Lusa]

Mozambican flag carrier Linhas Aéreas de Moçambique (LAM) had a real debt that was lower than declared, due to a “technical oversight,” which forced a correction that improved the company’s liabilities, the Mozambican minister of transport and communications said on Wednesday.

“We were carrying an unsustainable debt, because we penalised ourselves with a technical lapse or limited knowledge,” but “a small correction” found that LAM “was not so bad in terms of debt,” said Mateus Magala.

The known debt of over US$300 million that the airline had been declaring, “in reality, was less than that,” because a part “of what was charged as debt was not debt,” added the minister.

Mozambique’s minister for transport and communications said that the revaluation of the flag carrier’s charges had made it possible to recover US$47.3 million of debt , in favour of the company’s cash flow, within a month.

The operation, Magala continued, was due to the “deep technical knowledge” of Fly Modern Ark, the South African company hired by the Mozambican government in April to help normalise LAM’s financial and operational situation.

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

Mateus Magala said that Fly Modern Ark’s intervention aimed to “put the house in order,” and later the government would decide on the future of the airline, depending on the options indicated in studies on the viability of the carrier, which include privatisation or identifying a partner company.

On Monday, LAM’s new management committee announced that the company was no longer insolvent as it had collected US$47.3 million in state and private debt since April, but remains at risk of collapse.

“The debt position has been reduced,” improving the debt to equity ratio, leading LAM to “no longer be considered insolvent,” said Sérgio Matos, a member of the company’s management commission.

Matos also said that the carrier’s recovery strategy involves reactivating the Maputo-Lisbon route and exploring new destinations such as Brazil, India, Dubai and China, the management committee announced on Monday.

“We are going to reopen some routes. The first phase will be Maputo-Portugal, then the subsequent phases will be Maputo-Sao Paulo, Maputo-Guanzhou, Maputo-Mumbai, Maputo-Dubai,” said committee member Sérgio Matos.

Source: Lusa