If competition requirements are reached, the sale of South African Airways will proceed.
The Competition Commission of South Africa (compcom) has recommended that South African Airways (SAA) be sold to Takatso Aviation Proprietary Limited, which seeks to acquire a 51 percent stake in the national carrier.
Compcom has recommended that the proposed merger be approved by the Competition Tribunal. Following the culmination of an investigation into a merger notification received in June 2022, a recommendation has been made. Upon completion of the transaction, Takatso will acquire a 51% stake in SAA, while the government will retain the remaining 49%.
The sale of SAA will substantially alter the airline’s operations, necessitating regulatory measures from compcom. In order to attain equity and efficiency in the South African economy, the Competition Act empowers the commission to investigate and assess restrictive business practises and mergers.
Merger conditions
The privatisation negotiations of South African Airways have been ongoing for a very long time. The merger risked not receiving sanction from compcom due to the negative effects it would have on aviation industry competition.
The Competition Commission is concerned that the privatisation of airlines will likely reduce or eliminate competition in the domestic passenger market. The involvement of LIFT’s parent company, Global Aviation, is the principal concern of the commission.
As Global Aviation has the authority to nominate Takatso board members, the transaction will likely facilitate the exchange of competitively sensitive information and market intelligence between SAA and LIFT.
The South African flag carrier’s competitively sensitive information will be accessible to Takatso due to its substantial stake in the airline. Considering how concentrated the domestic airline market is, this is a significant concern. In addition, the market has stringent entry requirements and permits coordinated effects.
To circumvent these effects, the commission and parties have agreed to a divestiture condition. Global Aviation and Syranix will fully divest from Takatso prior to the merger’s implementation. This condition is non-negotiable for the transaction to proceed.
The involvement of Global Aviation and LIFT Takatso was established for this proposed merger. Takatso is owned primarily by the asset management firm Harith General Partners Proprietary Limited, with Global Aviation and Syranix holding minority stakes.
LIFT is a joint venture between two aviation professionals and Global Aviation, an ACMI provider based in South Africa. Syranix is a co-owner of the LIFT trademark but does not possess an Airline Operators Licence (AOL) for domestic passenger service.
In addition, Harith has investments in infrastructure initiatives across multiple industries, including the Lanseria airport in Johannesburg. However, the commission has determined that this is not a significant issue.
The prospects for SAA personnel
The parties’ initial rejection of the divestiture and employment conditions prompted the commission to recommend that the merger be prohibited. In accordance with the agreement, compcom has recommended the sale’s approval.
Compcom has also taken steps to guarantee the employment of SAA personnel. Takatso will be compelled to maintain a minimum number of SAA employees if the merger is approved.
The only other condition to be addressed is the participation of various stakeholders. Compcom’s role in significant mergers is advisory only. It has submitted its recommendation to the tribunal, which will make the final determination.
