A proposed partnership between Kenya Airways (KQ, Nairobi Jomo Kenyatta) and South African Airways (SA, Johannesburg O.R. Tambo) could be seen as a merger depending on its impact on regional competition, according to the COMESA Competition Commission (CCC), the competition watchdog of the Common Market for Eastern and Southern Africa (COMESA).
According to ch-aviation.com, Speaking at a press conference in Bagatelle, Mauritius on February 14, CCC Chief Executive Officer Willard Mwemba said the proposed transaction between the two airlines has not yet been presented to the Commission. “That potential transaction, I will not call it a merger because it has not been presented to us, but that potential transaction, if it were to be categorised as a merger, it would have to be notified to the Commission because Kenya Airways operates in a number of COMESA member states.”
Speaking hypothetically, Mwemba said it was not the form or the terms that companies used that determined whether it was a merger or not, but rather the effect it would have on competition in the region. “Companies may claim that this is just a partnership and not a merger; what we worry about is not the term, nor the form, but the effects on the market,” he said.
As Kenya Airways operates in the COMESA common market, it must inform the regulator of its plans with SAA. “The company that operates in COMESA is Kenya Airways, South Africa is not a [COMESA] member state,” he said.
Kenya Airways and SAA signed a Strategic Partnership Framework in November 2021, touted as a key milestone towards creating a pan-African airline. The two anchor partners have set themselves the ambitious target of establishing the structure of the new group holding company by the end of 2023.
As reported, the idea, aimed at consolidating Africa’s fragmented airline industry, is the brainchild of Kenya Airways Chief Executive Allan Kilavuka, who has been leading the way in promoting the pan-African alliance while SAA awaits regulatory approval of its partial privatisation deal with its strategic equity partner, Takatso Consortium.
Both airlines have rejected merger suggestions, saying the partnership would be commercial. The airlines would coordinate their networks and schedules around their respective hubs – Nairobi Jomo Kenyatta and Johannesburg O.R. Tambo. Apart from code-sharing and coordinated pricing, the model would allow the partners to significantly reduce their operating costs through economies of scale and bulk procurement of aircraft and ground handling.