Privatization or extinction of LAM returns to debate

The Mozambican flag carrier has accumulated losses of around US$350 million.

The privatization or even extinction of Linhas Aéreas de Moçambique (LAM) was once again defended as the best solution to the situation of technical bankruptcy in which the flag company finds itself, which in recent years has accumulated losses worth around 22 billion of meticais, around 350 million dollars.

A study by the Center for Public Integrity (CIP), released on Thursday the 9th, points to the privatization of LAM, without putting its liquidation aside, as the best approach to the situation of that company, spending most of its social capital to be under the private domain, so that it can manage its destiny in a commercial logic.

Economist Gift Essinalo, author of the study, considers that privatization will help in injecting capital into the company and in resizing and retraining the company’s existing workforce.

He advances that the extinction of the company would put an end to the demand for financial resources from the State coffers to respond to operating costs and the company’s debt, which, despite being the only “monopoly” operator, in the period 2016 and 2021, accumulated losses assessed at 350 million dollars.

According to that economist, the company’s revenues are insufficient to guarantee its operation because the company, during all this time, has not been able to adjust its cost structure to the revenues it has been making, “and here we can say that there is bad management” .

Essinalo states that privatization is justifiable when the private sector proves to be efficient in relation to the State in the production and provision of a good or service, and extinction proves to be an ideal solution for commercially unfeasible companies that have a long history of losses , negative equity and high debt.

Several international companies will be interested in LAM’s business, including Ethiopian Airlines and Malawi Airlines.

However, academic Adelson Rafael warns that, if not properly safeguarded, the privatization process could have negative effects because without regulatory mechanisms we could have a monopoly and influence on the tariffs that will be practiced by the companies that will eventually stay with LAM .

Sociologist Moisés Mabunda has no doubts that privatization will only bring benefits to citizens, “because there may be more frequent flights to places where we want to go, as well as prices will be competitive”.

Meanwhile, the Mozambican Minister of Transport and Communications, Mateus Magala, announced that the future of the company will be known later this month and underlined that “what we intend is to have a company that we are proud of, sustainable, competitive, that does not represent a cost for the Government and that capitalizes on the national market, where it has a near monopoly”.

“I cannot move forward if we are going to privatize or transform the company into a partnership”, concluded the minister.

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