Europe's big four tour operators are set to become two, with TUI's tourism division and First Choice unveiling plans to merge just one month after Thomas Cook launched its takeover of MyTravel.

The new entity, TUI Travel, will be 51%-owned by holding company TUI AG, with the other 49% controlled by First Choice. Combined turnover will be €17.6 billion ($23.8 billion), compared with €12 billion for Thomas Cook/MyTravel.

The merger is expected to get the go-ahead from the European Commission, even if political pressures mean the competition authorities may ask for more time to examine both deals, putting the completion timeframe back from August to the end of October.

TUI chief executive Michael Frenzel, who will chair TUI Travel, says cost savings of £100 million ($200 million) will be made in the first three years, mainly in the UK. One-third of this will come from aviation.

First Choice chief executive Peter Long, who will become chief executive of the new entity, says "there will be opportunities to reduce the size of the fleet" and stresses that the merging of the two fleets will offer "flexibility". David Pope, financial analyst at Brewin Dolphin, says TUI Travel will take costs out of the mainstream European package markets, which are important but have limited growth opportunities. Expansion is likely on longer sectors, such as southeast Asia, he says.

First Choice's 25 aircraft, including Airbus A320/A321s, Boeing 757s and 767s, will come off lease over the next five years, says Long. TUI's German operations, the first to fly under the company's pan-European brand, include a 56-strong 737 Next Generation fleet. TUI's UK Thomsonfly operation has 47 aircraft, including 737s (mainly classics), 757s and 767s.

First Choice and TUI have 23 787s on order, which Long describes as a "massive opportunity". Earlier this year TUI ordered 65 aircraft from Boeing, including an undisclosed number of 737s. "We have the flexibility to adapt fleet size to demand," says Long.

peter long    

"We have the flexibility to adapt fleet size to demand", Peter Long, chief ­executive, First Choice


Source: Airline Business