Mozambique: LAM getting rid of Embraer aircraft to standardise its fleet – IGEPE | AIM report

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Mozambique: LAM getting rid of Embraer aircraft to standardise its fleet – IGEPE | AIM report

11:53 CAT | 14 Jun 2021

File photo: Noticias

Mozambique Airlines (LAM) is selling off two aircraft manufactured by the Brazilian company, Embraer, in an attempt to standardise its fleet according to the director of the government’s Institute for the Management of State Holdings (IGEPE), Raimundo Matule, cited in Monday’s issue of the Maputo daily “Noticias”.

LAM acquired three Embraer 190AR aircraft under a contract signed in 2008. One of them crashed in Namibia in November 2013, but the other two are still in service.

At the time, the then chairperson of the LAM Board, Jose Viegas, declared that the Embraer 190 was “precisely the model we needed”. He said “Our objective was to replace the larger aircraft in our fleet with newer and smaller ones, thus enabling us to increase frequencies, open new routes, and better serve our customers”.

This enthusiasm has now been replaced with open scepticism. Matule said it made no sense for a company as small as LAM to operate aircraft made by three different companies – the other LAM aircraft operating scheduled flights are Boeing 737s, and the Canadian Bombardier Q400.

Matule said getting rid of the Embraer planes would improve performance and minimise LAM’s operational costs. Running an airline with several different makes of plane, he added, leads to high costs in maintenance and acquiring spare parts.

So the current strategy for LAM was that the company should operate with no more than two types of aircraft. It was not possible to rely solely on Boeings, because some Mozambican airports have runways that are too short to accommodate a Boeing-737.

Matule said the LAM Boeings will be used for long runways and long distances, and the Bombardiers for medium distances.

To keep the company flying, last year IGEPE injected 700 million meticais (11.3 million dollars, at current exchange rates) into LAM. This was because, due to the crisis caused by the Covid-19 pandemic, passenger numbers plummeted, and so did LAM’s revenue.

Neither Matule nor “Noticias” mentioned that among the main reasons for the LAM decision to obtain the Embraer 190s was a bribe of 800,000 dollars paid by the Brazilian company to Mozambican officials, including Viegas.

Embraer admitted the accusations of bribery years ago, and paid enormous fines ordered by both Brazilian and United States investigators.

The bribe came to light due to investigations by Brazilian and US prosecutors into Embraer’s business practices. Embraer confessed to paying bribes to secure contracts in several countries, including Mozambique. The settlement Embraer reached with the US and Brazilian authorities involved paying total fines of around 225 million dollars, and giving full details of the bribes, which have been in the public domain for years.

Between 2008 and 2011, Embraer paid bribes in the Dominican Republic, Saudi Arabia and Mozambique. The US Justice Department also found ‘improper conduct’ by Embraer in India. Embraer’s profits from all the bribery schemes was estimated at 83.8 million dollars.

From the documents of the Brazilian Federal Prosecutor’s Office, we know that Viegas negotiated the size of the bribe. He insisted that the deal would not go ahead without a bribe.

Currently Viegas, former Transport Minister Paulo Zucula, and the former representative in Mozambique of the South African petrochemical company Sasol, Mateus Zimba (accused of setting up a shell company into which Embraer paid the bribe) are on trial in Maputo on charges arising out of the bribe.

The prosecution and defence have already summed up, and the verdict and sentence are expected on 22 July.

Source: AIM