Mozambique’s minister for transport and communications said on Wednesday that 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 at the government’s session of answers to questions from members of parliament.
“The situation of LAM is worrying, without proper intervention, LAM may be on the verge of collapse,” Magala said, citing an international report requested by the executive and which, if no measures are taken, says that there are only three ways forward: liquidation, controlled bankruptcy or privatisation.
The minister explained that to avoid “collapse” the government had turned to South African company Fly Modern Arc for joint management (announced on 18 April) to stabilise the Mozambican carrier.
Fly Modern Arc’s mandate is transitional and should create the conditions for a next stage, which will be the recovery and growth of the company, he stressed.
In 2022 alone, the company recorded losses of around $75 million (€68 million) and had a significantly high debt-to-equity ratio, he added.
“The unrestructured debt [of LAM] will keep the company losing more and more,” the minister emphasised.
Mateus Magala noted that the company has an “elitist” pricing policy as they are high, making it unattractive and short of flag carrier status.
He noted that no air carrier with an international reputation had accepted a partnership for the recovery of 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 deterioration of its operations.
The firm “has lost the capacity to honour its commitments, including not paying salaries to its many workers and has an overall accumulated debt of over US$400 million (365 million euros), with a tendency to worsen,” Mateus Magala said.
Tmcel is gradually losing market share and its equipment is outdated, compared to its competitors, he noted.
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, with a view to attracting a strategic partner to help with the company’s recovery.