The partnership between Kenya Airways (KQ) and South African Airways (SAA) could be treated as a merger, the Common Market for Eastern and Southern Africa (COMESA) said due to its effect on regional competition.
Kenya Airways operates in COMESA member states; therefore, it is bound by the community's regulations and has to notify the COMESA Competition Commission (CCC) of any impending mergers. According to the CCC, it is not the form or the strategy in which the two airlines approach this partnership but rather the effect it has on competition that will determine it as a merger.
Both the airline, Kenya Airways and South African Airways have denied the merger claiming that the deal is a partnership in which they will use their existing assets.
Refuting the claims, CEO of the commission, Willard Mwemba, said: “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.”
While SAA is not in the CCC, Mwemba noted that KQ operates within the Common Market, in East and Southern Africa, and that it is bound to notify the commission it the transaction between KQ and SAA were to be categorised as a merger.
The partnership between Kenya Airways (KQ) and South African Airways (SAA) was formalised after both airlines signed a memorandum of cooperation (MoU) in September 2021. The deal was expected to improve the financial viability of the two airlines.
According to reports published at the time, the airline was expected to launch in 2023.
However, the partnership between the two airlines was never directly referred to as a merger.
The partnership would help both airlines increase passenger traffic, cargo opportunities, and general trade by taking advantage of strengths in South Africa, Kenya, and the continent at large. In July 2022, KQ and SAA included a codeshare agreement that would see each airline sell, under its own code, flights operated by each other, building on their initial MoU.
Both the airlines, South African Airways and Kenya Airways have been struggling with debt and losses for years which worsened by the pandemic. As of November 2022, Kenya Airways' debt amounted to $835 million. South African Airways had accumulated debts of $461 million, but eventually emerged from voluntary business rescue and resumed operations in September 2021.