Mozambique: FMA says LAM needs a US$10 million government bailout, willing to return

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Mozambique: FMA says LAM needs a US$10 million government bailout, willing to return

12:31 CAT | 28 Oct 2024

File photo: Domingo

Fly Modern Ark (FMA), which left the restructuring of Mozambique Airlines (LAM) after 15 months on September 12, says that the state-owned airline needs US$10 million to continue operating, and is willing to return to the process.

In a note sent to Lusa, FMA states that the fleet of the Mozambican airline – “reduced to three aircraft, from ten” during the period of the South African company’s management – is now in “urgent need of support”.

“Without a government bailout of at least US$10 million, LAM’s future remains uncertain,” the FMA says.

The agreement between Linhas Aéreas de Moçambique (LAM) and FMA, the South African company that led the restructuring of the Mozambican flag carrier, ended on September 12, the FMA’s Theunis Christian de Klerk Crous told Lusa at the time.

“We had a contract with LAM and the contract ended. We did what we were hired to do,” explained Theunis Crous, who temporarily served as director of LAM between February and July this year, as part of the Mozambican flag carrier’s restructuring plan, which began in 2023.

The contract between FMA and LAM came into force in April 2023, when the South African company was called in to implement a strategy to revitalize the company after years of operational problems related to a reduced fleet and lack of investment, with a record of some non-fatal incidents associated by experts with inefficient aircraft maintenance.

In a statement signed by Theunis Crous, the FMA says it views with “great concern” the suspension of LAM from the International Air Transport Association (IATA) inter-line compensation system [IATA Clearing House] “for failing to honour its commitments”.

“During FMA’s involvement, IATA management was a focal point as it represented a significant loss of money for LAM. The FMA took decisive action to suspend all payments to suppliers through IATA, successfully controlling IATA-related costs. However, since FMA’s departure there has been a reported increase in expenditure, with supplier invoices sent to IATA totalling US$3 million [€2.8 million],” it warns in the same statement.

“In addition, it has come to our attention that suppliers and service providers have not been paid, leading to an increase in airline ticket prices – a stark contrast to the 30% price reduction that the FMA implemented during its leadership,” it adds.

The company also states that the agreement reached in July, which led to the appointment of Américo Muchanga as the new president of LAM, “marked a smooth transition to new leadership”, with the FMA expressing “its willingness to collaborate in the future, if necessary”.

“The period under the guidance of the FMA was fundamental to the stabilization of the airline, despite the need for a major fleet renewal and efforts to maintain operational viability,” the company relates, recalling that “it had only 15 months to face the complex task of restructuring LAM”, which “many considered impossible”.

“Although significant progress has been made, no restructuring effort can be fully accomplished in such a limited period of time, which contributes to the current challenges that LAM faces. The FMA remains committed to supporting the government and people of Mozambique and stands ready to assist in the revitalization of the economy, drawing on its extensive experience in the Mozambican, regional and international aviation sectors,” the FMA adds.

In the same document, the FMA recalls that the intervention it carried out at LAM “occurred at a critical time”, when the Mozambican airline “was facing serious financial challenges, including debts of approximately US$400 million [€370.4 million]”.

Source: Lusa