The Competition Commission on Friday said that it prohibited the proposed merger between SA Airlink and Safair Operations because the transaction was likely to result in a substantial prevention of competition.
SA Airlink is the largest independent regional airline in southern Africa and operates a feeder network linking smaller towns and regional centres in South Africa, in a strategic alliance with South African Airways (SAA).
Safair operates a passenger and cargo service, and in 2013 launched the regional low-cost carrier FlySafair.
In November, the companies filed an application at the Commission for approval to merge under the umbrella of the Airlink group of companies.
But the Commission said that the merger was likely to result in the removal of an effective competitor to SA Airlink on the routes it currently operates on. 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.
The Commission said that Safair was also a potential competitor of SA Airlink on those routes which it has not yet entered and was likely to pose a competitive constraint on SA Airlink bearing in mind its current competitive pricing on competing and non-competing routes.
The Commission found that there were significant price differences between Safair and SA Airlink and that if the merger were to be approved, there was a likelihood of significant price increases.
The Commission further found that the merger was likely to result in coordinated effects through the exchange of competitively sensitive information between SAA and Safair since SAA has a shareholding in SA Airlink.
In this regard, the Commission found that the merger would likely result in the enhancement and facilitation of coordinated conduct, and that no remedies could sufficiently address the competition concerns identified.
Meanwhile, SA Arilink said on Friday that they were disappointed to learn from that the Commission had declined to approve the merger, and that it would challenge the decision.
"We respectfully disagree with the decision and the points the Commission has raised to justify its decision," Airlink said in a statement.
"With this in mind, 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."