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Cablegate: New Mozambican Airline Raises Safety and Security

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 04 MAPUTO 001658

SIPDIS
STATE FOR AF/S, AF/EPS, EB/TRA, CA/OCS
POSTS FOR CIVAIR OFFICERS
DAKAR FOR FAA JONES
SENSITIVE
E.O. 12958: N/A
TAGS: EAIR SNAR KCRM MZ SA
SUBJECT: NEW MOZAMBICAN AIRLINE RAISES SAFETY AND SECURITY
QUESTIONS

Sensitive but Unclassified - Business Confidential and Law
Enforcement Information - Handle Accordingly. Not for
Internet Distribution.
Action Request for EB/TRA and CA/OCS in paragraph 13.

1. (SBU) Summary: In August 2004, Air Corridor became
Mozambique's first private commercial airline to operate
nationwide, breaking the monopoly that the government-owned
Linhas Aereas de Mocambique (LAM) had maintained since
independence. Air Corridor has injected much-needed
competition in Mozambique but has raised eyebrows since it is
an entirely new company whose true ownership and finances are
not well known. Furthermore, Air Corridor's quality of
equipment and maintenance capacity pose significant safety
and security questions. Pending Department guidance on next
steps, Embassy Maputo will not be using Air Corridor for
official travel. End Summary.

Business Basics
---------------
2. (U) Air Corridor is a small but ambitious Mozambican
start-up airline. After starting flight operations on
August 7, 2004, it is now flying daily from its home base
in Nampula (northern Mozambique) to Maputo and the
provincial capitals of Beira, Quelimane, and Pemba, with
once-weekly service to Tete and Lichinga planned for
January 2005. Management hopes to begin international
service to Johannesburg, Dar es Salaam, and Nairobi in
2005, but does not have approval from the host governments
yet. The airline currently only has one airplane, a 26-
year old Boeing 737-200 which it has wet leased from
Phoenix Aviation, a Russian-owned company based in the
United Arab Emirates. With the wet lease, Phoenix also
provides Air Corridor with four Russian and Kazakhstani
pilots and maintenance operations based in Nampula. To
expand operations, the company plans to switch from wet
leasing to dry leasing in mid-2005, and plans to acquire
two additional Boeing 737s by dry lease. This arrangement
would require Air Corridor to directly hire its own pilots
and provide its own maintenance equipment. Air Corridor is
not currently a member of the International Air Transport
Association (IATA), but has inspections planned and hopes
to secure membership in early 2005.

3. (SBU) The new airline has been responsible for a steep,
immediate, across-the-board cut in airfares within
Mozambique. Prior to Air Corridor's arrival, air travel
had long been prohibitively expensive for most consumers.
For example, roundtrip coach class flights on LAM from
Maputo to the northern provincial capitals of Nampula and
Pemba had cost over $500. Air Corridor is now charging
4,300,000 meticais ($210) for roundtrip flights from Maputo
to Nampula and slightly more for Maputo-Pemba. LAM has had
to respond in kind, though its prices are still 10-15%
higher than Air Corridor fares. Air Corridor is currently
operating at roughly 45-50% occupancy, and its management
admits that it will lose over one million dollars in its
first year of operation. If it has the finances to survive
such losses, Air Corridor could develop into a serious
competitor in the domestic and perhaps regional market.

Ownership Group
---------------
4. (SBU) The source of those finances is a serious
question, however, with potential security ramifications.
The actual owners of the company are difficult to identify.
According to CEO Momade Aquil Rajahussen, 95 percent of Air
Corridor's shareholders are Mozambican, with additional
shareholders based out of India, Sri Lanka, and the United
Arab Emirates. The Grupo Gulamo, a corporation owned by
members of Mozambique's prominent Gulamo family, owns the
majority of shares in Air Corridor. Mr. Aquil serves not
only as CEO of Air Corridor but also as Director General of
Grupo Gulamo. Mozambican law enforcement officers and even
the Gulamo-affiliated travel agency used by Air Corridor
believe that the Mozambican ownership content is much less
than what Mr. Aquil states. The Omani owner of the five-
star Pemba Beach Hotel has been mentioned as a principal
shareholder.

5. (SBU) The Gulamos are third-generation Mozambican
citizens of Pakistani descent who run a wide range of
business interests throughout the country, particularly
import-export businesses of electronics, food, and
clothing, and also agricultural investments. The family is
active in the Islamic community, donating funds to build or
reconstruct several mosques throughout the country, among
other initiatives. The Gulamo family is associated with a
moderate form of Islam. This is reflected in Air
Corridor's head office in Nampula, which features many
women in mid-to-high ranking positions and a very relaxed
dress code.

6. (SBU) Local authorities have long suspected the Gulamo
Group of being involved in drug trafficking, and sources in
Maputo's police criminal investigation unit (PIC) tell us
that they suspect Air Corridor will be used to aid
smuggling operations. Rasul Gulamo, a cousin of Mr. Aquil
who owns the prosperous Moti rental car company in Nampula,
was caught smuggling 40 tons of hashish into Mozambique in
1995, and then 12 tons in 1998. (He was eventually
released without trial.) Rasul is not a partner in Grupo
Gulamo, however, and there are no publicly known cases of
drug smuggling by the Gulamo Group. Nevertheless, the
Gulamo family's increasing wealth and evident political
connections have kept trafficking suspicions alive. PIC
and officials from potential competitor airlines (TAP, SAA)
also find it suspicious that Air Corridor has purchased its
own tractor and baggage handling equipment, instead of the
leasing arrangement it uses for other assets, because they
say this could facilitate smuggling operations. Air
Corridor management, for its part, said that the LAM-
affiliated Mozambique Airport Handling Services had tried
to overcharge them for services, which led them to buy
their own equipment.

Safety and Reliability
----------------------
7. (SBU) Air Corridor's safety record has also been left
open to question, thanks to a series of incidents that made
the local papers. On August 10, Air Corridor's Boeing 737
and a smaller plane from the local charter service
Transairways came within minutes of landing on the same
airstrip at Maputo airport. A similar incident happened
with LAM at Beira airport on August 26, with the LAM
Embraier 120 incurring some damage to the undercarriage
upon landing. It is difficult to know who is really at
fault in these cases. Antonio Pinto, director of
Mozambique's civil aviation authority, defended Air
Corridor in an early December meeting, telling Emboff that
the first incident was Transairways' fault, despite press
coverage to the contrary, and that its pilot has been
suspended. The second incident he blamed on faulty
equipment in the LAM plane.

8. (U) On December 14, the Air Corridor suffered a further
setback when a bird apparently was sucked into the left-
side engine of its Boeing 737 on a flight from Nampula to
Beira, creating considerable damage. The 55 passengers
were dropped off in Beira without incident, and the
airplane has been awaiting repairs in Beira since then.
Phoenix Aviation, responsible for repairs under terms of
the lease, has had difficulty acquiring a replacement
engine from the United States, which will delay repairs
until January. In the meantime, Air Corridor has entered a
short-term lease with Inter-Link Airline of South Africa to
use an 80-seat DC-9 for regular operations. Daily flights
resumed again on December 17.

9. (U) The incident underscores concerns about Air
Corridor's ability to maintain a 26-year old Boeing 737-200
that flies up and down the length of the country seven days
per week. According to Air Corridor's CEO, the wet lease
arrangement with Phoenix Aviation not only provides
maintenance equipment in Nampula, but also provides a
replacement aircraft of the same model upon reaching 750
flight hours. If, however, Air Corridor decides to expand
operations by obtaining further aircraft on a dry lease, as
is planned, it is unclear how the airline could carry out
quality maintenance operations for additional aircraft
unless it is able to secure a route to Johannesburg.

10. (SBU) Air Corridor's safety rests largely on the
capacity of Phoenix Aviation to provide timely maintenance,
responsible pilots, and sound equipment. Unfortunately,
post's knowledge of the company is limited. According to
internet sources, Phoenix Aviation is a Russian-owned
outfit based out of Sharjah Airport in the United Arab
Emirates. Phoenix operates a fleet of over twenty Boeing
737s, 767s, Ilyushin Il-18s, and Antonovs, most of which
are leased to other airlines. Companies now leasing from
Phoenix include Air Somalia, Kam Air (Afghanistan), Muscat
Aviation Services (Oman), and Bismillah Airlines
(Bangladesh). Internet sources also claim that Phoenix may
have been involved in arms smuggling operations in Africa
in the 1990s, while under different ownership. Mr. Aquil
states that Phoenix is now a UN contractor working in Sudan
and elsewhere, but post could not confirm this. The
airline has a couple of safety blemishes on its record,
including a belly landing of an Ilyushin-18 cargo plane in
Sri Lanka in February 2004. In 1994, a Phoenix Aviation
Boeing 737-200 crashed in England, killing five people.

Why Air Corridor?
-----------------
11. (SBU) Even if Air Corridor manages to resolve its
safety and financing issues, observers question why the GRM
civil aviation authority would approve the untested Air
Corridor as the only competitor for LAM in Mozambique's
domestic market. Established airlines such as South
African Airways (SAA) and TAP Air Portugal, which both run
international flights into Maputo and Beira, are seen as
more worthy competitors. Mr. Pinto has argued, in
response, that Mozambican law only permits Mozambican-owned
companies to operate in the domestic market (in conflict
with its Yamoussoukro Decision commitment to enact an Open
Skies Agreement with all substantially African-owned
companies). International airlines such as SAA, TAP, and
Air Mauritius have expressed an interested in acquiring
majority or significant minority shares of LAM when it is
privatized, but were never were interested in working in
partnership with a start-up Mozambican company. Outside
sources suspect that certain government officials may have
received an ownership share in Air Corridor, but no one has
evidence to support such an allegation.

Future Outlook
--------------
12. (SBU) Air Corridor may become a successful, stable
airline in the future. It is difficult, however, to say
whether and how Air Corridor can withstand months, perhaps
years of heavy losses caused by its low fares and middling
occupancy rates. If Air Corridor survives, we expect that
rumors of drug smuggling and corruption will continue to
follow the company, especially since its ownership and
financing sources are unknown. Above all, we are concerned
that the company's plans for expansion raise additional
significant air safety questions that are beyond post's
ability to easily answer.

13. Action Request: Post requests Department guidance on
next steps. Pending receipt of guidance, we will not be
using Air Corridor for official travel. Requested guidance
includes criteria for authorizing official travel on new
airlines and also guidelines for potential advisories to
American citizens. Also, post believes that any additional
information that info addressees can provide about Phoenix
Aviation would be useful.
DUDLEY

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