UPDATDED: TUI must offload Budget Travel to allow First Choice merger

TUI has been required by the European Commission to divest of its market leading Irish tour operating arm Budget Travel to enable it merger with First Choice to go ahead. 

The newly created £12.1 billion TUI Travel – created by the merging of the two operators – is due to begin operations on October 1 following the Commission’s approval.

This will reduce from four to two the major UK operators after Thomas Cook won the green light to merger with MyTravel (see previous TravelMole story).

Clearance by the Commission is subject to an undertaking to divest TUI’s Budget Travel in Ireland, where their were concerns over market monopoly given First Choice’s ownership of Falcon in Ireland.

The merger will lead to £100 million in cost savings over three years with the UK taking the brunt of the cuts.

TUI Travel will have sales of around £12.1 billion and an underlying EBTIA of £340 million.

First Choice chief executive Peter Long said: “We are pleased that the Commission has recognised the sea-change in the leisure travel brought about by internet-based travel and tourism businesses and the low cost airlines.

“We will now be able to press forward with the merger process and the creation of TUI Travel PLC, whch will offer great value holidays and leisure travel experiences for our customers.”

TUI AG CEO Dr Michael Frenzel said the Commission’s announcement “sees us take the first step on the path to creating a world leading leisure travel group”.

He added: “With the merger we are expanding our leading position in Europe and are gaining more ground in the specialist toursim growth sector. The merger creates the world’s biggest tourism platfrom.” 

But the consolidation of the UK’s big four operators down to two was attacked as being the “worst possible news for British consumers”.

Jet2holidays claimed the mergers will mean that people can expect far less choice and flexibility, as well as rising prices.

Managing director Richard Bodin said: “Consolidating the holiday market simply reduces choice. Today’s consumer wants flights from their local airport, departure dates to suit their needs and flexible holiday durations. This merger reflects exactly the opposite.

“Are we to believe that these mergers are to benefit the British consumer?  Absolutely not, this will lead to holidaymakers being offered far less choice and far less flexibility.”

by Phil Davies