Kenya Airways and South African Airways announced their plans to form a pan-African airline that will enhance passenger traffic, cargo opportunities, and general trade in South Africa, Kenya, and Africa in general.
However, the partnership is not sitting well with the Common Market for Eastern and Southern Africa (Comesa) Competition Commission (CCC), as it may potentially hinder competition in the region, reports business daily.
The CCC has stated that the proposed partnership between Kenya Airways and South African Airways would be treated as a merger due to the possible impact it may have on competition in the region.
Kenya Airways operates in countries that are members of Comesa and is bound by the regional watchdog’s treaty, which means it will be forced to notify CCC of an impending merger.
Kenya Airways and South African Airways have consistently denied that they are merging, insisting that they are only partnering by using their existing assets. However, the CCC stated that the effect the partnership will have on competition in the region is what matters, not the terms or the form that the airlines use.
“The two may claim that this is just a partnership and not a merger; what we worry about is not the term they use or the form but the effects that the coming together of the two will have in the market,” said CCC Chief Executive Officer Willard Mwemba.
Allan Kilavuka, the CEO of Kenya Airways, has previously expressed concerns that regulatory requirements by competition bodies might hinder the process. “We wanted to see if we can share assets and other resources, but the authorities need to immunize us so that we can overcome hurdles that may come up in regards to antitrust and anti-competition requirements,” said Mr. Kilavuka during an investor briefing for half-year to June 2022.
According to Mwemba, by virtue of the fact that Kenya Airways operates in the common market, they will need to inform the CCC of a potential matter despite the form that the transaction may take. “The company that operates in Comesa is Kenya Airways, South Africa is not, but that potential transaction if it were to be categorized as a merger, then CCC has to be notified,” he said at a press conference in Bagatelle, Mauritius on February 14.
The proposed partnership between Kenya Airways and South African Airways is aimed at consolidating Africa’s fragmented airline industry, which has long struggled to maintain profitability. The two airlines have set themselves the ambitious target of establishing the structure of the new group holding company by the end of 2023.
Despite the potential challenges, the idea of a pan-African airline has garnered significant support, with Kenya’s former President Uhuru Kenyatta and his South African counterpart Cyril Ramaphosa initiating the talks.
During his recent State visit to Kenya, Ramaphosa assured President William Ruto that the plans of forming the airline remain on course.
