THOMSON Travel Group has conceded that it can no longer remain clear market leader if Airtours’ bid for First Choice succeeds and has instead outlined its plan to become the joint number one in the newly consolidated travel industry.
Thomson said it would add an extra 1m passengers over two years from summer 2000, taking its capacity to 5.75m, on a par with a combined Airtours/First Choice.
But Thomson stressed there would be no price war and claimed its actions did not amount to flooding the market.
The statement was designed to pacify shareholders who were angry at Thomson’s response to Airtours £852m bid, when the market leader said it would substantially increase capacity to protect its position (Travel Weekly May 3). The statement led to Thomson’s share price slipping 24p in one day.
A spokesman for Thomson said:”We appreciate that our communication could have been stronger and we are in the process of visiting our major shareholders and explaining the strategy in more detail.”
Thomson said it would invest £30m over two years to increase volume, partly through its new budget brand which will be launched at the end of May. It refused to say how much of the extra capacity would be through adding no-frills holidays, but the market leader clearly feels that its current budget brand, Skytours, which has a capacity of only 200,000, is not capturing enough of the market.
Thomson will also expand direct brand Portland, which currently accounts for 500,000 holidays, and add volume through its mainstream agent brands.
It said it was merely accelerating its current policy and also expected to pick up share following the integration of First Choice with Airtours and from Thomas Cook axeing Inspirations. It stressed it only wanted to be market leader to gain greater buying power and economies of scale.
One city source said:”Thomson is resigned to the fact that Airtours will take over First Choice and is cobbling together a contingency plan. But whatever way you look at it, cheap holidays are going to be added to the market.”
Kuoni has released a statement telling shareholders it still favours a tie-up with First Choice, but advising them to take no action until it becomes clear whether Airtours’ bid will be able to succeed.
Meanwhile, industry observers believe Lunn Poly will have a distribution problem if Airtours’ bid succeeds. Lunn Poly currently accounts for 26% of First Choice’s business, but this will reduce dramatically if the bid succeeds, leaving the operator without a mainstream alternative to Thomson.
n News and reaction, page 2; Thomson’s retail problem and Comment, page 6; Columnists, page 11