South Africa’s Competition Commission has rejected the proposed takeover of Safair Operations (Pty) Ltd. by Airlink (South Africa) (4Z, Johannesburg O.R. Tambo) citing anticompetitive concerns.

Under the proposed deal announced in November last year, Airlink would have secured control of Safair Operations whose units include ACMI/charter specialist Safair (FA, Johannesburg O.R. Tambo) and the FlySafair (FA, Johannesburg O.R. Tambo) budget carrier brand. In return, Safair's shareholder, Ireland-based ASL Aviation Holdings, would have gained a minority stake in Airlink Group. Safair and FLySafair would have continued to operate separately under their unique brands while Airlink’s existing South African Airways franchise partnership was to have continued as before.

However, the CC said in its ruling issued on Friday, February 23, that the merger would likely result in the removal of an effective competitor to Airlink on the routes which it currently operates. 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.

Echoing findings raised earlier this month following an inquiry into Airlink's alleged predatory conduct on the Johannesburg O.R. Tambo-Mthatha route, the CC said Safair would likely be a competitive constraint on Airlink bearing in mind its current competitive pricing on competing and non-competing routes. The CC said it had found that there are significant price differences between Safair and Airlink and were the merger to be approved, there was a likelihood of significant price increases.

Other issues raised by the CC include the possibility of coordinated effects through the exchange of competitively sensitive information between SAA and Safair (and Airlink) since SAA has a shareholding in Airlink.

As Airlink currently operates as an SAA franchisee through branding and scheduled coordination agreements, in the event the Airlink/Safair merger were to be approved, Airlink would be able to adapt Safair's business strategy such that it becomes party to the Airlink/SAA partnership. The CC contends that even if Safair were excluded from these agreements, the fact that SAA has an indirect economic interest in Safair via its Airlink equity could lead to a dampening in competition between Safair and SAA (and presumably, by extension, South African Express (XZ, Johannesburg O.R. Tambo)).

For its part, Airlink and Safair have expressed their disappointment in the CC's ruling adding that they intend to contest the decision and its justification with the Competition Tribunal.

"..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," they said. "We firmly believe the proposed transaction will be beneficial, not only for the two companies, but for their customers, employees, suppliers, the local and regional air transport markets as well as the broader South African economy."