Mozambique: LAM to pay off debt in annual instalments with state guarantee

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Mozambique: LAM to pay off debt in annual instalments with state guarantee

2:11 CAT | 03 Sep 2025

File photo: Lusa

State-owned LAM (Mozambique Airlines) will pay its debt in annual instalments, guaranteed by the state with commercial banks, according to the resolution authorizing the operation, approved yesterday by the government.

A statement from the Council of Ministers session held on Tuesday states that the government had approved “the resolution authorizing the payment of annual instalments of LAM’s debt, guaranteed by the State with commercial banks”, although without disclosing the amounts involved.

To this end, the government authorized the Institute for the Management of State Holdings (IGEPE), the entity that manages and coordinates the state’s business sector, to establish a vehicle specifically for the management and settlement of the debt.

Also approved yesterday was a resolution authorizing the formation of a special purpose company owned by the companies Hidroelétrica de Cahora Bassa (HCB), Ports and Railways of Mozambique (CFM), Empresa Moçambicana de Seguros (EMOSE), and LAM shareholders, “whose main objective is to secure financing for the acquisition of a stake” in the airline.

Mozambican President Daniel Chapo said on April 28 that there are “foxes and corrupt individuals” within LAM, with “conflicts of interest” that prevented the company’s restructuring in its first 100 days in office, including the goal of acquiring three aircraft during that period.

The crisis led the company to virtually cease international flights this year and to the formation of a new administration in May and the entry of HCB, CFM, and Emose as shareholders.

To minimize recurring flight cancellations, the company plans to acquire five Boeing 737-700 aircraft and, pending this process, has launched a tender to lease another five.

LAM’s losses soared to 3.977 billion meticais (€53.5 million) in 2023, forcing the state to inject one billion meticais (€13.7 million) and issue a comfort letter in 2024, as reported by Lusa on August 7.

LAM, which has not publicly released its accounts, had recorded losses of 448.6 million meticais (€6 million) in 2022, which soared the following year, according to the most recent available financial statements.

The airline has been facing operational problems for several years related to a small fleet and lack of investment, with a number of non-fatal incidents attributed by experts to poor aircraft maintenance. It is currently undergoing a major restructuring process.

Despite the accumulated losses that year, when the state-owned airline was managed by South African company Fly Modern Ark (FMA), LAM’s service sales actually grew 4% in 2023 compared to the previous year, reaching 8.813 billion meticais (€118.7 million), according to the report.

The document states that LAM “obtained a commitment” from the majority shareholder “to provide the necessary resources” to enable the airline to “fulfil its obligations and commitments” to third parties, “through a comfort letter” issued by Igepe and dated October 7, 2024.

It adds that, then, “given the loss recorded” in the fiscal year “of 2023 and in previous years” and because the company closed its accounts that year with negative equity of 19.67 billion meticais (€265 million), compared to 16.765 billion meticais (€225.8 million) in 2022, and because current assets “were less than current liabilities” by approximately 18.641 billion meticais (€251 million), the carrier’s continued existence was in question.

“Aware of this situation, the board of directors, through several presentations to shareholders regarding the company’s situation, also proposed measures, some short-term and others strategic, to maintain the company’s sustainability,” the report reads, adding that in 2023 the state “made accumulated supplementary payments amounting to 1,017,393,669 meticais [€13.7 million]”.

Source: Lusa