Commission puts paid to a merger between SA Airlink and Safair
THE COMPETITION Commission yesterday stood by its decision to prohibit the proposed merger between regional airline SA Airlink and low-cost Safair.
The commission, which decides on mergers and acquisitions applications, in February blocked plans by SA Airlink, a subsidiary of national carrier SAA, to take over Cape Town-based Safair, the parent company of FlySafair.
The commission found that the proposed merger would likely result in a substantial prevention or lessening of competition in the market.
FlySafair and SA Airlink were aggrieved by the decision and approached the Competition Tribunal, arguing that the commission had erred in its decision.
They also said that the merger was beneficial not only for the two companies, but for their customers, suppliers and the domestic and regional transport sector.
The tribunal hearing was scheduled at the end of this month.
However, both parties abandoned the merger altogether late last month.
“The commission’s decision to prohibit the merger therefore stands,” said the commission in a statement.
SA Airlink was established in 1992 and has a route network of 39 destinations, including smaller towns, cities and regional centres in nine countries. Safair was established in 1965 and in 2014 it launched FlySafair, a low-fare carrier competing in South Africa.
The commission found that the merger was likely to result in the removal of an effective competitor FlySafair to SA Airlink, particularly on the routes in which FlySafair competed against SA Airlink.
It said that FlySafair offered competitive prices and had been growing in the market both in its existing routes and new routes. On the other hand, it said SA Airlink had a monopoly, or near monopoly, position on most routes it currently operated on.
“FlySafair is also a potential competitor to SA Airlink on those routes, which it has not yet entered, but could potentially enter in future and therefore poses a competitive constraint on SA Airlink in this regard. This is especially so bearing in mind FlySafair’s current competitive pricing on most routes that it operates in,” said the commission.
The commission found that there were significant price differentials between FlySafair and SA Airlink, with FlySafair being cheaper, and that if the merger were to be approved, there was a likelihood of price increases due to the loss of competition from the merger.
In February the Competition Commission also referred SA Airlink to the Tribunal for excessive and predatory pricing on the route between Johannesburg and Mthatha in the Eastern Cape, squeezing out airline Fly Blue Crane.