South African Airways (SAA) has been in the midst of a semi-privatization process, with the Takatso consortium poised to acquire a majority stake. However, the Competition Commission has recommended that two companies, Syranix and Global Aviation, who co-own low-cost airline LIFT, leave the consortium before it acquires SAA. The commission stated that their presence in SAA would lead to a substantial reduction and brake on competition in the market for national passenger airlines.

The Competition Commission’s Concerns

In a statement, the Competition Commission expressed apprehension that the Takatso consortium’s acquisition of SAA could reduce competition in the domestic passenger airlines market. The commission highlighted the potential for Takatso to gain access to SAA’s competitively sensitive information, given its majority stake in the airline. This concern is further amplified by the concentrated nature of the domestic passenger airlines market, where barriers to entry are high, and coordinated effects are possible. To remedy this, the commission and the parties involved have agreed to a divestiture condition. This condition stipulates that Global Aviation and Syranix, both minority shareholders of Takatso, must fully divest from the consortium before the merger’s implementation.

The Competition Commission’s recommendation also included a moratorium on layoffs. Takatso will have to maintain a minimum number of employees at SAA. The deal was initially rejected by Takatso, but after some negotiation, the consortium agreed to the terms set by the commission, including the divestiture of Syranix and Global Aviation.

Takatso’s Response and the Minister’s Support

Gidon Novick, a co-founder of LIFT, a low-cost airline operated by Global Aviation, stated that they had not agreed to sell their minority stake and intended to remain as minority shareholders without board representation or access to sensitive information. Novick highlighted the industry practice of airlines cooperating in various ways, citing SAA’s previous partnership with Airlink. On the other hand, Public Enterprises Minister Pravin Gordhan welcomed the Competition Commission’s decision, emphasizing that it would strengthen SAA, provide necessary capital, and position it as an essential economic enabler for the country.

Implications for Takatso Consortium

The Takatso consortium, led by infrastructure investment firm Harith, is now faced with the requirement of complying with the commission’s conditions. Harith will become the sole company in Takatso, as Global Aviation and Syranix fully divest. Harith’s stake in Lanseria Airport, though previously subject to scrutiny, was deemed unlikely to raise concerns by the commission.

SAA has been in the red since 2011 and was sold for around €3 to Takatso in May 2022. The consortium must invest nearly $200 million in SAA, with the state adding $120 million, and retaining 49% of the capital. Harith General Partners Proprietary Limited, an asset management company that has invested in the development of the Johannesburg-Lanseria airport, is leading the consortium. SAA seeks to redevelop its long-haul business as part of the investment plan.

South Africa and Kenya announced a strategic partnership agreement in November 2022, with the objective of launching a pan-African airline group by 2023, which would bring together South African Airways and Kenya Airways. This followed a cooperation protocol signed by the two national companies two months earlier, with the aim of promoting the exchange of expertise, innovation, digital technologies, and best commercial practices.

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Victor Shalton

Victor Shalton's love for aviation can be traced to when he was 11-years-old. As a seasoned aviation writer, he takes pride in providing the best aviation coverage around the globe and is passionate about advancing his skills in the aviation space. In addition, he loves travelling, writing, arts and while his speaking engagements have taken him around the world, he is proud to call Nairobi home.

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