LAM Mozambique Cuts Debts By $60 Million In Just 3 Months

The carrier has seen improvements in key areas under its new management.

The flag carrier of the Republic of Mozambique, LAM, has reduced its debt by over $60 million in the last three months under the new leadership of South African firm Fly Modern Ark (FMA).

Fly Modern Ark took over the management of Linhas Aéreas de Moçambique (LAM) to help the government revive the national carrier and implement the restructuring process. At the time, the airline was reported to have debts amounting to about $300 million. While in Maputo, FMA representative Sérgio Matos said in a press conference;

"With regard to debt restructuring, at the moment, after three months, we have managed to reduce the debt by 61.6 million dollars."

Matos attributed the significant debt reduction to the accurate entry of business transactions, in line with international accounting standards, best practices, and the financial guidelines of the national treasury. The company also offset debts of over $23 million against debtors, resulting in LAM's improved financial situation.

The airline has also seen increased flight activity, with passenger numbers going up by 24% in the last three months, resulting in a 10% increase in flight revenue to nearly $10 million. This resulted from the company's addition of three aircraft and a 30% reduction in ticket prices on six domestic routes operated by LAM.

Fly Modern Ark, which offers management and consultancy services to various aviation companies, came together with LAM's management in April 2023 to improve the airline's efficiency and reliability. At the end of March, LAM had operated about 911 flights. However, according to LUSA, this number increased by 15% to over 1,047 by the end of July.

In May, FMA announced that LAM Mozambique was no longer bankrupt. Matos explained that the company had reduced its debt by $47.3 million, achieving a debt-equity ratio of less than one, meaning it would no longer be considered 'technically insolvent.'

LAM managed to reach this milestone by suspending all sales of tickets on credit, resulting in a 15% increase in revenue. Additionally, it collected a significant percentage of debts accumulated over the past two decades, with the most significant single debtor being the Mozambican government.

The national carrier had been trapped in financial troubles for an extended period, as it continuously recorded losses and significant debt while operating in a high-cost environment. The current management expects to improve the airline's revenue-generating capacity by enhancing service delivery and profitability while reducing redundancies and duplications.

Check out more African aviation news here

Although LAM managed to escape bankruptcy, it needs more aircraft in its fleet to enhance its capacity and generate more revenue to settle the remaining debt and return to profitability. The carrier currently has nine aircraft, with four leased from various organizations. The fleet comprises two Boeing 737-700s, two CRJ900s, two EMB-145s, and three DHC-8-Q400s.

The Mozambican carrier has also launched a few key destinations in the last three months. In June, LAM launched flights from Maputo (MPM) to Lusaka (LUN) with a stop in Harare (HRE). Earlier this month, the carrier returned to Johannesburg, connecting OR Tambo International (JNB) with Beira (BEW) and Vilankulos (VNX).

On August 29, Sérgio Matos revealed plans for the airline to return to Portugal. It is currently working on obtaining the necessary licenses to relaunch flights between Maputo and Lisbon after over ten years. FMA will continue to work with the airline to ensure improvement in all critical areas.

What do you think of LAM's performance under FMA's management? Please share your thoughts in the comments!

Source: LUSA, Club of Mozambique

Journalist - Tatenda is a passionate aviation enthusiast and by combining his love for flying with his writing skills, he has become the Africa correspondent for Simple Flying. He provides the latest news and insight on airlines, airports, and other developments from all regions of the continent. He has been interested in aviation and flying from a very young age. Based in Johannesburg, South Africa.