KQ, SAA deal could be treated as a merger by competition authority: report

Kenya Airways, 5Y-KQX, Boeing 767, Johannesburg OR Tambo International
aeroprints.com / Wikimedia Commons

The partnership between Kenya Airways (KQ) and South African Airways (SAA) could be treated as a merger, the Comesa Competition Commission (CCC) said.  

The CCC’s latest comments regarding the deal, which was formed with the long-term goal of creating a pan-African airline group, were reported by Business Daily on February 20, 2023. 

The CCC, a Malawi-based regulatory body that promotes competition within the Common Market and its member states, said that KQ-SAA deal will be considered a merger based on its effect on regional competition and not as its claimed form as a partnership, the report added.  

The Commission’s chief executive officer, Willard Mwemba said: “The two [airlines] 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 the Nairobi-based airline is bound to notify the commission it the transaction between KQ and SAA “were to be categorized as a merger”. 

Partnership or merger? The origin of the SAA-KQ alliance  

The partnership between Kenya Airways and South African Airways was formalized after both airlines signed a memorandum of cooperation (MoU) in September 2021.  

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.  

During a state address on December 31, 2021, Kenya’s former president Uhuru Kenyatta said the two airlines would “join hands” to “establish a Pan-African Airline with unmatched continental reach and global coverage.”   

Kenya Airways Group managing director and chief executive officer Allan Kilavuka referred to the deal as a “collaboration” in a press release at the time, while SAA noted that the partnership did not prevent either firm from pursuing commercial cooperation with other carriers.  

Business Daily also noted that during an investor briefing for half year to June 2022 Kilavuka said: “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 regard to antitrust and anti-competition requirements.” 

Expanding partnership and cooperation  

However, according to an interview with Business Daily carried out in June 2022, SAA chief executive officer John Lamola (who was acting CEO at the time) said: “KQ is carrying cargo for us on routes where we don’t operate as a third-party service provider.”  

In July 2022, KQ and SAA signed a codeshare agreement to expand their destination networks building on their initial MoU.  

In an April 2022 investor briefing, KQ Board Chairman Michael Joseph revealed that Kenya Airways was interested in attracting a West African airline to join its alliance with SAA to help supplement the airlines’ connectivity ambitions across the continent.  

“The intention is to invite a West African airline at some point in the future to also join. We will have a three-hub strategy of Nairobi, Johannesburg, and the West African hub to create better opportunities and services for our customers,” Joseph was quoted as saying by Nation Africa in April 2022

Will Kenya’s government sell KQ stake to interested investors?   

In a recent interview with Bloomberg in December 2022, Kenya’s newly elected President William Ruto said that the government is keen on selling its entire stake in Kenya Airways (KQ) to interested parties.    

“I’m not in the business of running an airline that just has a Kenyan flag, that’s not my business,” Ruto said, emphasizing that the Kenyan government is “looking for partnerships that will make Kenya Airways a profitable entity whatever that means, in whatever configuration, [and in] whatever form it takes.”  

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