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In-house carriers operated by First Choice Holidays and TUI Group are set to operate a combined fleet of 23 Boeing 787s if the proposed merger of the two companies goes ahead, but the airlines’ overall fleet size could be reduced.

The two groups announced earlier today that First Choice Holidays plans to merge with the tourism division of TUI Group to form a new entity called TUI Travel, which will be 51%-owned by TUI and 49%-owned by existing First Choice Holidays.

First Choice Airways recently increased to a dozen the number of Boeing 787s it has on firm order but says the combined entity has a current order book of 23 Boeing 787s.

A TUI Group spokesman says the remaining 11 aircraft have been ordered by the German tour operator. TUI Group had made no previous public announcement of a 787 order, but last December revealed a planned acquisition of 65 Boeing aircraft comprising a mix of unspecified short and long-haul aircraft. The spokesman says TUI Group’s 787 order forms part of that 65-strong aircraft order.

He adds that it has yet to be decided whether TUI Travel will operate the 23 787s under a combined airline, or whether the aircraft will be operated under separate brands.

Speaking to analysts in a conference call to discuss the planned merger, First Choice CEO Peter Long – who will head up TUI Travel following the merger – said that when the airlines of both groups are put together “there will be opportunities to reduce the size of the fleet”.

Long says the expiry of existing aircraft leases, combined with First Choice Airways’ 787 order and TUI Group’s 65-strong aircraft order, will give TUI Travel a “flexible model going forward”, which will allow for a reduction in the size of the overall fleet. He does not disclose any further details.

TUI operates seven in-house carriers: Hapagfly, Hapag-Lloyd Express, Thomsonfly, TUIfly Nordic, Arkefly, Corsair and Jetair. These carriers operate a combined fleet of more than 120 aircraft, more than half of which are Boeing 737 models.

First Choice Airways operates a fleet of 34 aircraft, including Boeing 757s and 767s, as well as Airbus A320s and A321s.

Hapag-Lloyd CEO Christoph Mueller will be in charge of the TUI Travel airline unit following the merger.

Long says the merger will help the two travel companies address the “rapidly changing leisure travel market”, which has been impacted by the growth of low-cost airlines and a reduction in customer demand for “fixed duration package holidays”.

He notes the merger will result in €150 million ($200 million) in synergies three years after the completion of the transaction, which is expected to close in the third quarter of this year. Most of these synergies will be achieved in the UK market.

TUI Travel is predicting pro-forma revenues of €17.6 billion and EBITDA of €809 million. The deal also includes the transfer by TUI Group of €875 million in net debt.

The post-merger company will be headquartered in the UK and will be listed on the London Stock Exchange.

Source: Air Transport Intelligence news