Mozambique: LAM no longer bankrupt – Watch

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Mozambique: LAM no longer bankrupt – Watch

8:46 CAT | 30 May 2023

Photo: TVM

The international commission headed by the South African company “Fly Modern Ark”, chosen by the Mozambican government to help revive Mozambique Airlines (LAM), announced on Monday that technically the national flag carrier has improved considerably so it is no longer considered bankrupt.

When Fly Modern Ark started to manage LAM in April, the company had a debt burden of around 300 million dollars.

“Indebtedness has been reduced by 47.3 million dollars, thus reaching a debt equity ratio of less than one and therefore LAM is no longer considered technically insolvent”, explained Sérgio Matos, manager of Fly Modern Ark, in Maputo at a Monday press conference.

To achieve this, the company suspended all sales of tickets on credit, which allowed it to increase revenue by 15%. It also collected a substantial part of the debts accumulated over the past 20 years. The largest single debtor was the Mozambican state.

According to Matos, LAM has the potential to be a successful, profitable and sustainable airline, as well as adding value by implementing a radical restructuring of its business management and operational models.

Matos said it is imperative “that LAM be reorganized and restructured since it is operating es in a challenging, dynamic and highly competitive business environment.”

He added that the main causes of LAM’s situation were high operating losses, unsustainable debt and high fuel prices in recent years.

Given its limited revenue generation capacity, Matos said, “LAM is not competitive in the market. In order to ensure operational efficiency, improved service delivery, and profitability, redundancies and duplications must be identified and eliminated.”

LAM expects to introduce, in the next three weeks, two new aircraft and reactivate air links from the cities of Beira and Nampula to the rest of the provinces.

The national flag carrier also intends to reactivate the Maputo-Lisbon route, in a first phase and in subsequent phases it will fly to Sao Paulo, Mumbai and Dubai. For this purpose, Fly Modern Ark will bring in aircraft and some capital to revive the business.

Currently LAM operates in the market with seven aircraft, of which two are constantly under maintenance and with 753 employees which translates into a ratio of 112 employees per aircraft.

LAM aims to increase the number of aircraft up to 15 and if this is achieved, it will no longer be necessary to reduce the number of employees.

It should be noted that with the restructuring of LAM, the cost of airline tickets to some destinations has fallen by 30 per cent, in an attempt to increase passenger numbers.