Mozambique: Flag carrier subsidiary Moçambique Expresso stops all flights, operations

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Mozambique: Flag carrier subsidiary Moçambique Expresso stops all flights, operations

1:31 CAT | 05 Sep 2023

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

Mozambique Expresso (MEX) has suspended all operations involving domestic and regional flights since 31 August, according to an internal communication to which Lusa had access on Tuesday, in conflict with state-owned LAM, of which it is a subsidiary.

“We regret to inform you that the board of directors of MEX – Moçambique Expresso SA, meeting in restricted board 026/30 on 30 August 2023, decided to suspend operations with effect from 31 August 2023,” reads a letter signed by the general director, Faustino Massitela, addressed to the airline’s management.

According to the company, MEX operates three Embraer 145 aircraft to various destinations in the country and the region, at the service of LAM, which is facing severe financial difficulties that in April led the government to place it under the management of South Africa’s Fly Modern Ark (FMA).

“In addition to providing LAM with medium-sized aircraft to fulfil the LAM timetable, MEX provides ground assistance and various other services (…) From all these services, MEX only receives the equivalent of 200,000 dollars, which is used to pay part of the staff’s salaries,” reads another communication, to which Lusa had access today, dated 29 June, signed by Faustino Massitela.

“The failure to channel the amounts to MEX puts the company in a situation of lack of liquidity to honour its commitments to suppliers, putting the company at risk of closing its doors,” it adds.

In the same letter, the company warns that since 1 June there has been “a substantial reduction in the use of the MEX fleet, which compromises the company’s ability to generate revenue to support its costs, as well as under-utilisation of available financial resources”.

In addition, the company “has been accumulating debts with suppliers whose participation in MEX’s operations is vital for the continuity” of the company, in this case associated with engines and maintenance by Rolls-Royce, Embraer and American General Supplies.

“It is our opinion that LAM and MEX, involving the FMA, must find an urgent solution to the situations referred to here. Failure to resolve these issues puts Mex in a situation where it could cease operations at any time,” the general manager warned in the same letter, something that materialised on 31 August.

One of MEX’s debts is to Embraer, for 1,167,309.89 dollars (around 1.1 million euros), which the company acknowledges in another communication, sent to the Brazilian company on 14 November, regarding the acquisition of the ERJ145 fleet.

In that letter, MEX proposed paying 50 per cent of this debt to Embraer earlier this year, amounting to 583,654.95 dollars (550,000 euros). Without resolving this debt, MEX’s management recognised at the time that the dispute “prevents it from receiving or requesting any service or technical support from Embraer”.

Linhas Aéreas de Moçambique (LAM) has reduced its debt by 57 million euros since April and continues to recover, Fly Modern Ark’s management said on 29 April.

“With regard to debt restructuring, at the moment, after three months, we have managed to reduce the debt by 61.6 million dollars [57 million euros],” said Sérgio Matos, a representative of Fly Modern Ark, at a press conference in Maputo.

When Fly Modern Ark took over management of the state-owned airline in April, LAM had an estimated debt of around 300 million dollars (277.7 million euros), according to figures provided at the time.

Sérgio Matos said that the reduction in creditor charges was the result of “correct entries of transactions in accordance with international accounting standards, generally acceptable accounting practices and the accounting guidelines of the national treasury”.

Matos revealed at the time that LAM was in negotiations with the manufacturer Boeing for the reimbursement of 23 million dollars resulting from the pre-payment of a new aircraft that was never delivered to the Mozambican carrier.

In the last three months, LAM has seen a 24 per cent increase in the number of passengers carried, to more than 56,000, and flight revenue has risen by 10 per cent, to 671 million meticais (almost 10 million euros).

Although LAM has emerged from insolvency, the carrier needs more aircraft to ensure an operation that allows it to pay off its high debt and generate profits, noted the Sérigio Matos

Fly Modern Ark says that it has managed to get LAM to fulfil its fleet maintenance requirements imposed by international regulations and contain the costs inherent in this service.

Source: Lusa