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Cablegate: Private Air Carrier Fails, State Airline Expands

VZCZCXRO1542
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHTO #0380 1210602
ZNR UUUUU ZZH
R 300602Z APR 08
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 8841
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHLO/AMEMBASSY LONDON 0153

UNCLAS MAPUTO 000380

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EAIR ECON ETRD PGOV PREL MZ
SUBJECT: PRIVATE AIR CARRIER FAILS, STATE AIRLINE EXPANDS

1. Private Mozambican airline Air Corridor may not fly again
as both of its Boeing 737s are grounded in South Africa with
major maintenance problems. The company began operating in
2004 and suffered from several safety and maintenance
incidents over the course of its existence. (Note: Embassy
Maputo had prohibited USG personnel from traveling on Air
Corridor until 2007. End note.) Furthermore, Aeronexus, the
South African company handling Air Corridor's maintenance
contract, reported that Air Corridor had no records for
routine repairs and inspections of its aircraft ) reason
enough for civil aviation authorities to withdraw the
company's operating license. Air Corridor, which marketed
its service as a "low-cost, no frills alternative" to the
state-controlled airline Mozambican Airlines (LAM), never
successfully penetrated Mozambique's domestic market.

2. (SBU) LAM's CEO Jose Viegues told the Charge recently
that LAM plans to invest USD 150 million over the next three
years in a modernization program that includes the
acquisition of aircraft and training of pilots and
maintenance technicians. Viegues said that the modernization
process contemplated, amongst other initiatives, the sale of
the company's products via the Internet and introduction of
an automated check-in and boarding system. On April 26, LAM
announced that the company had finalized a leasing agreement
to bring an ex-AeroMexico Boeing 737-200 into domestic
service. LAM executives have told Emboffs privately that in
addition to reviewing more options on Boeing aircraft, they
are also in exploratory talks with Brazil's Embraer on the
purchase of smaller regional jets. Contacts from General
Electric--which would provide engines for the Embraer
jets--have confirmed these talks are ongoing.

3. (SBU) Viegues also told the Charge that LAM is prepared
for a full open-skies regime within SADC countries in 2009
(the only remaining regional route subject to controls is the
extremely lucrative Maputo-Johannesburg market), as the
carrier has controlled costs, shed unneeded personnel and cut
unprofitable intercontinental routes. He said, however, that
the major hindrance to LAM's expansion was the GRM's
requirement that the carrier continue to fly many
unprofitable domestic routes--refueling in some remote areas
was especially expensive. He said that LAM had to raise
prices on money-making routes to provide the internal subsidy
needed to operate on the unprofitable ones. He also noted
that cargo was the most significant source of revenue for the
company--not passengers--which could ultimately tip
purchasing and leasing decisions in favor of Boeing's larger
aircraft.

4. (U) COMMENT: While LAM likely used its state-owned status
in the Mozambique domestic market to squelch Air Corridor's
efforts to gain a foothold, Air Corridor never really posed a
threat to LAM's near-monopoly. Even so, Air Corridor's
departure seems to have given LAM the confidence and security
it needed to embark on a fairly aggressive expansion plan by
historical standards, which could bode well for U.S.
companies like Boeing and General Electric. In this
environment, the GRM's professed desire to enter into open
skies discussions with the USG (reftel) may portend the winds
of economic change in Mozambique's civil aviation sector
towards a freer, more competitive regional market. END
COMMENT.
Chapman

© Scoop Media

 
 
 
 
 
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