US embassy cable - 04MAPUTO1658

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