Job fears as merger creates UK's biggest travel firm

Rival British tour operators MyTravel and Thomas Cook are to join forces after revealing plans for a £2.8bn (€4.2bn) merger today in a move that has sparked fears of job losses.

The new company, to be called Thomas Cook Group, will become the UK’s number-one tour operator and be a closer rival to the current European leader, German company Tui, when the deal is completed in May.

Thomas Cook’s owner, German retailer KarstadtQuelle, will hold the majority 52% stake in the new business, with MyTravel shareholders owning the remaining 48%.

Job losses are looming for the new company’s 33,000 staff after MyTravel and Thomas Cook said they expected to make £75m (€112.7m) a year in savings through the merger.

Manny Fontenla-Novoa, chief executive of German-owned Thomas Cook, said the “main focus” of the cuts would be among the combined group’s 19,000 UK staff, although he refused to confirm the number of redundancies planned.

MyTravel chief executive Peter McHugh added that the £75m (€112.7m) savings would come from “organisational consolidation” and economies of scale and production.

Brendan Gold, national officer of the Transport and General Workers’ Union, which has hundreds of members at Thomas Cook, said: “Any merger clearly raises the spectre of job losses, so we will be seeking an urgent meeting to secure the best interests of our members.”

Thomas Cook’s headline brands include party-lovers’ favourite Club 18-30 and budget operator Sunset, while MyTravel counts Airtours and Going Places among its leading operations.

The merged company will have an estimated 35% share of the UK package-holiday market, flying 6.3 million UK passengers and 19.1 million in total.

It was valued at £2.8bn (€4.2bn) after a surge in MyTravel’s share price today, but the company still needs to be backed by shareholders and competition authorities before trading in the new business can start. Thomas Cook will also pursue a listing on the London Stock Exchange.

MyTravel’s share price soared 30%, 72.5p, to 310.5p on news of the deal, which analysts said would help drive down costs in a flagging package-holiday sector facing increasing competition from “do-it-yourself” internet holidays.

Greg Johnson, an analyst at Shore Capital stockbrokers, said: “With the potential to take additional capacity out the market place and the reduction in the major multiples (firms) from five to four, we believe that the merger is good news for the industry.”

The companies said today that the the merger would expand its market position in Europe and make it the new market leader in the UK and Scandinavia. It added that cost savings would be directed towards expanding online sales and premium travel.

The big loser from the news was fellow tour operator First Choice, which had been hoping to sell its mainstream holiday business to either MyTravel or Thomas Cook.

Both companies have pulled out of the running for the business following the merger, sending First Choice’s shares slumping 13% to 263.5p.

KarstadtQuelle chairman Thomas Middelhoff will chair the new company, with MyTravel chairman Michael Beckett becoming his deputy.

Thomas Cook was originally set up in 1841 by the founder of the same name, before KarstadtQuelle and German airline Lufthansa bought the firm in December 2000.

MyTravel, founded by David Crossland, began life as Airtours in 1973 before changing its name to MyTravel in 2002. The firm was close to collapse in 2004 before chief executive Peter McHugh restructured the firm’s £800m (€1.2bn) debt and brought the business back into the black.