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Mega-merger cooks up charter consolidation

Consolidation in the UK holiday market has created a third vertically integrated giant, with the announcement that Thomas Cook is to grow again through a merger with the Carlson Leisure Group. Thomas Cook, which has only just swallowed Sunworld and Flying Colours, will now emerge as a $40 billion travel group, complete with a sizeable charter airline operation.

The merger brings Carlson's Caledonian Airways and its even lower-cost Peach Air brand, together with Sunworld's Airworld, which is already in the process of merging with the Flying Colours airline. The enlarged group has indicated that all four carriers will be flying under a single brand by the start of next year's summer holiday season, although speculation is still rife over which. Peach Air will definitely go, and so could the Caledonian Airways name. Adverse publicity over technical delays cannot have helped and it may be easier to stick with the fresher Flying Colours brand. A final decision is likely to follow marketing surveys on which of the brands has the best public image.

Thomas Cook, a relative newcomer to the airline business, will gain Caledonian's valuable London Gatwick slots as well as the Flying Colours base at Manchester.

The new grouping also pledges to strengthen its presence around the regions, with flights from London Stansted, Bristol, Cardiff, Birmingham and Glasgow.

The new combined airline will have the UK charter market's second largest fleet of 32 aircraft, although with 4 million passengers per year it remains smaller than Britannia, Air 2000, Airtours and Monarch.

Flying Colours and Airworld now operate six Boeing 757-200s, six Airbus A320s and two A321s, while the Caledonian and Peach Air fleets comprise five A320s, 10 Lockheed L1011 TriStars, two McDonnell Douglas DC-10-30s and one Boeing 737-200. The fleet will be rationalised but, for now, it is understood that the TriStars will be retained and up to three British Airways DC-10-30s may be acquired for long-haul routes.

Thomas Cook will give its name to the new travel group, with its German parent, the Westdeutsche Landesbank, possibly owning up to 60% of the shares. The remainder goes to Carlson.

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