THE Competition Commission
has prohibited a proposed
merger between Airlink and
Safair Operations, stating
that the transaction is likely
to result in a substantial
prevention of competition,
leading to price increases
that would disadvantage
consumers. FlySafair is a
division of Safair Operations.
In December Airlink
announced its plans to
acquire Safair, citing costsaving
economies of scale
as the motivation. The
proposed merger planned
to retain the two airlines’
existing products, fleets
and management teams,
continuing operations
separately.
The Competition
Commission said that the
merger would remove an
effective competitor to Airlink
in terms of both existing
and potential routes, the
competitor being FlySafair.
As FlySafair offers
competitive prices and has
been growing in the market in
terms of its existing and new
routes, the Commission felt
that the merger was likely to
pose competitive constraints
on Airlink and FlySafair in
terms of routes. According
to the commission, as a
result, price increases were
likely to occur should the
merger go ahead, levelling
out the significant existing
fare differences between the
two airlines.
Additionally, the
Commission found that the
merger was likely to result
in reducing competition
between SAA and FlySafair
due to the shares that
SAA has in Airlink and the
long-standing franchise
relationship between the two
carriers.
“The merger is likely to
result in co-ordinated effects
through the exchange of
competitively sensitive
information between SAA and
Safair,” the statement said.
“Airlink currently operates
under agreements with SAA.
In the event that the merger
were to be approved, Airlink
would have the ability to
adapt the business strategy
of Safair such that Safair
is incorporated into the
agreements between SAA
and Airlink. Furthermore,
even if Safair were not to
be incorporated into these
agreements, SAA would have
an indirect economic interest
in Safair post-merger and this
would dampen competition
between Safair and SAA, (and
presumably by extension SA
Express),” the statement
added.
Airlink and Safair advised
that they were disappointed
the proposed acquisition
had not been approved
and that they would approach
the Competition Tribunal for
an opportunity to address
and allay the concerns,
most of which related to
airline operational technical
matters.
