Mozambique’s state aviation and telecommunications companies need measures to avoid “collapse”

Mozambique’s Minister of Transport and Communications said today that the Mozambique Airlines (LAM) and telecommunications company Tmcel face the risk of “collapse” if there are no immediate and urgent measures for their financial recovery.

Mateus Magala gave an overview of the two companies in the Government’s session of answers to questions from members of Parliament.

“LAM’s situation is worrying; without proper intervention, LAM may be on the verge of collapse,” Magala said, citing an international report requested by the executive.

According to the report, if no measures are taken, there are only three ways: liquidation, controlled bankruptcy, or privatization.

The minister explained that to avoid “collapse,” the Government has turned to the South African company Fly Modern Arc for joint management (announced on April 18) to stabilize the Mozambican carrier.

Fly Modern Arc’s mandate is transitory and should create the conditions for the next stage, which will be the recovery and growth of the company, he stressed.

In 2022 alone, he added that the company recorded losses worth about €68 million and had a rather high debt-to-equity ratio.

“The unrestructured debt [of LAM] will keep the company losing more and more,” the minister emphasized.

Mateus Magala noted that the company has an “elitist” pricing policy, making it unattractive and short of flag carrier status.

He pointed out that no airline with an international reputation has accepted a partnership to recover the Mozambican flag carrier, given the deterioration of its financial and operational indicators.

Regarding Tmcel, the Minister of Transport and Communications also warned of the risk of “collapse” due to the degradation of its operation.

The firm “has lost the capacity to honor its commitments, including the non-payment of salaries to its many workers, and has an overall accumulated debt of over €365 million, with a tendency to worsen,” Mateus Magala stated.

Tmcel is progressively losing market share, and its equipment is outdated compared to the competition, he emphasized.

The Mozambican minister said that a study had advised the sale of over 80% of Tmcel’s assets, reduction of the workforce, and assumption of debt by the state, to attract a strategic partner to help the company recover.

With information from Lusa

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