The European Commission is close to making a decision on Airtours’ renewed bid for First Choice. Steve Jones reports
ALMOST seven months of uncertainty will end later this month when Airtours finally learns if it has the clearance to launch a renewed bid for First Choice.
For three of these months, Airtours has been frantically stitching together a patchwork of concessions it hopes will sway the European Commission in its favour.
This involves selling parts of the First Choice business in a bid to ease EC fears that three players – albeit none with a dominant position – would hold collective dominance and collude on issues such as pricing.
But the signs from Brussels are not encouraging.
European Competition Commissioner Karel Van Miert, who is shortly to leave the EC, said last week that “bit here, bit there types of remedies are insufficient”.
He declined to reveal precise details of the Airtours offer but added it was “difficult to see any adequate remedies that will work”.
However, Airtours did return with further concessions prior to last Wednesday’s deadline which were debated by competition experts the following day. Rival operators have now been asked to comment.
The success of the deal hinges on whether Airtours can convince Brussels it can create a viable fourth player in the market by selling off segments of First Choice and by doing so reduce its own volume.
An obvious sacrifice to the EC is Unijet, which First Choice acquired in June last year for £110m.
But the tour operation alone is not considered enough to satisfy the competition authorities.
One analyst predicted Airtours would package Unijet with aircraft from the Air 2000 fleet along with seat-broking operation Viking Aviation – a loss which Airtours would lose no sleep over.
“It [Airtours] will be prepared to off-load a reasonable amount of charter capacity – probably about six or eight aircraft,” he said.
In a further concession to the independent sector Airtours is believed to have offered a guaranteed number of seats on its in-house airline to specialist operators.
Speculation has also centred on First Choice’s Irish operations – Falcon and JWT. It is felt they too may be up for grabs.
Airtours is mindful, however, that it cannot divest too many businesses for fear of damaging the viability of any rebid for First Choice.
Companies touted as possible buyers of the Unijet package are Virgin, EasyJet and Ryanair Holdings. But analysts do not believe any are serious contenders.
The front runners are thought to be Kuoni and Cosmos – although Unijet joint managing director Terry Brown admitted he and fellow managing director Nigel Jenkins would consider a management buy-out.
“We would be daft not to look at it,”he said. “But Airtours won’t be overkeen to lose Unijet. Don’t forget they wanted to buy us 16 months ago.”
Brown and Jenkins would require help from venture capitalists who, observers believe, would fail to see any long-term growth opportunities and not be interested.
One source predicted that only a bid from Cosmos or Kuoni would create a fourth force in the industry and satisfy the EC. “Unijet itself is not enough, even with Viking or Eclipse,” he said.
However, distribution is also at the forefront of Europe’s concerns and it is likely that Airtours would also have to throw in a number of shops. The obvious move would be to off-load First Choice’s new in-house retail chain Travel Choice although Airtours is thought to be ready to tear up its partnership with Advantage to get its way.
Yet according to word leaking from Brussels, all the negotiation may be meaningless as the EC is preparing to block the bid, whatever Airtours offers.
“Some EC officials want to send a message to every industry that such consolidation won’t be accepted anymore,” said one source. “They want to set a precedent. And that has been Airtours’ fear all along.”