|
(i) the names of the merger parties;
- CAE International Holdings Limited (“CAE”);
- Singapore Airlines Limited (“SIA”)
(collectively, the "Parties", each a “Party”).
(ii) a description of the transaction;
This notification relates to a proposed transaction through which CAE and SIA will create a full function joint venture company (the “JV”) that will establish, develop and operate a commercial flight training centre in Singapore to offer pilot type rating, recurrent, conversion flight training, for B744, B777, B787 and B737MAX (the “Boeing Aircraft Types”), and possibly, other Boeing aircraft platforms (the “Proposed Transaction”). The JV will primarily support the training needs of SIA and its wholly-owned airline subsidiaries in Singapore as well as third party airlines and other customers (where capacity allows) in respect of the JV training devices in the Asia Pacific region.
(iii) a description of the business activities of the merger parties worldwide and in Singapore;
CAE is registered and incorporated in Canada, and is an indirectly wholly-owned subsidiary of CAE Inc., a limited liability company incorporated and domiciled in Canada and publicly listed on the Toronto and New York stock exchanges.
CAE functions as an investment holding company of the CAE Inc. group of companies (the “CAE Group”). The CAE Group designs, manufactures and supplies simulation equipment, provides training, and develops integrated training solutions for defence and security markets, commercial airlines, business aircraft operators, helicopter operators, aircraft manufacturers and for healthcare education and service providers. The CAE Group offers a range of flight training devices based on the same software used on its simulators. The CAE Group also operates a global network of training centres with locations around the world.
SIA is a limited liability company incorporated and domiciled in Singapore, and is listed on the Singapore Stock Exchange.
The principal activities of the SIA (through itself or its subsidiaries) consist of passenger and cargo air transportation, engineering services, training of pilots, air charters and tour wholesaling and related activities.
(iv) a description of the overlapping goods or services, including brand names;
The Parties submit that they technically overlap in relation to aircraft pilot training services at a general level. However, SIA is not directly involved (to any material degree), in market facing aircraft pilot training services.
Notwithstanding the above, the Parties submit that the relevant markets for the purposes of this notification is that for the provision of commercial aircraft pilot training services for the Boeing Aircraft Types.
(v) a description of substitute goods or services;
Aircraft pilot training services for different aircraft types are highly specialised in terms of specific use from the customers’ point of view. Accordingly, there are unlikely to be any substitutes for the provision of training services in respect of any specific aircraft type.
(vi) The applicant's views on:
a. definition of the relevant market(s);
The Parties submit that the relevant market for the purposes of this notification is that for the provision of aircraft pilot training services for the Boeing Aircraft Types.
For the relevant geographic markets, the Parties consider that the relevant geographic markets would be at least regional (i.e. the Asia Pacific region).
b. the way in which competition functions in this market;
The Parties submit that the market for the provision of aircraft pilot training services is highly competitive, and there are a multitude of suppliers from which customers may obtain services, including aircraft manufacturers, airlines and independent third parties. Customers typically take into consideration a variety of factors including price and quality of training services.
c. barriers to entry and countervailing buyer power; and
The Parties submit that, in general, entry into the market for the provision of aircraft pilot training services requires capital and regulatory approvals. However, such requirements are not, in the Parties’ view, insurmountable. Potential entry into the market for aircraft pilot training services specifically for the Boeing Aircraft Types is feasible.
The Parties submit that the market for the provision of aircraft pilot training services is highly competitive and there are no barriers that would impede customers from switching suppliers. There are no major switching costs to customers between suppliers, other than those specified in their contractual terms (which are usually not unduly onerous). Customers in practice do procure aircraft pilot training services from multiple providers and are generally able to, and do, negotiate on price or other supply terms. In addition, airlines, who are potentially the main customers of the training centres, are also able to self-supply.
d. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).
Non-coordinated effects
The Parties consider that the Proposed Transaction does not give rise to any non-coordinated effects for the following reasons:
(a) the Proposed Transaction will not lead to any material increase in market shares relating to the provision of pilot training services on the Boeing Aircraft Types either in Singapore or the Asia Pacific region;
(b) there are numerous competitors that currently exist, both in Singapore and the Asia Pacific region, that are active in the provision of aircraft pilot training services for the specific Boeing Aircraft Types;
(c) while barriers to entry in the provision of aircraft pilot training services are not low, they are not insurmountable. Potential entry into the market for aircraft pilot training services specifically for the Boeing Aircraft Types is feasible; and
(d) customers are able to switch easily between suppliers, with low or minimal switching costs.
Coordinated effects
In particular, the Parties submit that coordinated effects will not arise as a result of the Proposed Transaction, in view of the following:
(a) there are numerous competitors in the provision of aircraft pilot training services, and the ease of switching by, and ability of self-supply of, customers in the industry creates strong commercial incentives for suppliers to continue pricing competitively. This reduces sustainability of coordinated behaviour; and
(b) barriers to entry in the provision of aircraft pilot training services generally are not insurmountable, and accordingly high potential for increased competition, creates disruptive effects and reduces sustainability of any coordinated behaviour.
|