Competition authority gives thumbs up to SAA-Takatso deal

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The Competition Commission has recommended that the Competition Tribunal approve the proposed merger between Takatso Aviation and South African Airways (SAA) subject to divestiture and employment conditions.

The divestiture condition means that Global Aviation, the operator of low-cost airline LIFT, will have to leave the Takatso consortium. In a statement, the commission said if the merger went ahead with Global Aviation and Syranix, which co-owns the LIFT trademark, as minority shareholders of Takatso, the SAA deal would decrease competition in the domestic passenger airlines market.

“Takatso will have access to SAA’s competitively sensitive information by virtue of its majority stake in SAA, pursuant to the proposed merger. This concern is further exacerbated by the fact that the domestic passenger airlines market is highly concentrated, barriers to entry are high and is amenable to coordinated effects,” it said.

“To remedy this concern, the commission and the parties have now agreed to a divestiture condition in terms of which Global Aviation and Syranix will completely divest from Takatso prior to the merger’s implementation.”

The competition watchdog said it considered that this fix-it-first remedy is appropriate in the circumstances given the extent of the concerns identified. 

The divestiture and employment conditions were initially rejected by the parties resulting in the commission initially taking a decision to recommend a prohibition of the merger.They later agreed on the conditions, including that for a “moratorium on merger-related retrenchments and to maintain a minimum number of employees at SAA”. 

The commission said  the merger does not raise any other substantial public interest concerns and so the Competition Tribunal would now consider its recommendations and make a decision on the deal.

The deal has been dogged by controversy since the public enterprises department announced two years ago that it had chosen Takatso consortium as its equity partner to take over 51% of SAA, which had been placed under business rescue.