The Competition Commission has prohibited the proposed merger between SA Airlink (Pty) Ltd and Safair Operations (Pty) Ltd, as the transaction is likely to result in a substantial prevention of competition.
The Commission is of the view that the merger is likely to result in the removal of an effective competitor to SA Airlink on the routes it currently operates on.
Meanwhile, SA Airlink says it is disappointed to learn that the Commission has declined to approve the merger, and it will challenge the decision.
“We respectfully disagree with the decision and the points the Commission has raised to justify its decision,” Airlink says in a statement on Friday.
“We will approach the Competition Tribunal for an opportunity to address and allay the Competition Commission’s concerns, most of which relate to airline operational technical matters and for the Tribunal to reconsider our application,” Airlink says.
Safair offers competitive prices and has been growing in the market both in terms of its existing routes, as well as recently entering new routes.
Safair is also a potential competitor of SA Airlink in those routes which it has not yet entered, and is likely to pose a competitive constraint on SA Airlink bearing in mind its currently competitive pricing on competing and non-competing routes.
The Commission found that there are significant price differences between Safair and SA Airlink and that if the merger were to be approved, there is a likelihood of significant price increases.
The Commission further found that the merger is likely to result in coordinated effects through the exchange of competitively sensitive information between SAA and Safair (and SA Airlink) since SAA has a shareholding in SA Airlink.
Further, SA Airlink currently operates under agreements with SAA. In the event that the merger were to be approved, SA Airlink would have the ability to adapt the business strategy of Safair such that Safair is incorporated into the agreements between SAA and SA Airlink.
Further, the Commission also found that even if Safair were not to be incorporated into these agreements, since post-merger SAA would have an indirect economic interest in Safair, this would dampen competition between Safair and SAA,and presumably by extension SA Express.
In this regard, the Commission found that the merger would likely result in the enhancement and facilitation of coordinated conduct.
The Commission found that no remedies could sufficiently address the competition concerns identified.