First Choice to merge with TUI

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The two firms said on Monday they planned to create TUI Travel, a London-based tourism giant with about 12 billion pounds of revenues, just weeks after rivals Thomas Cook and MyTravel announced plans to merge.

Analysts said the move by Thomson Holidays owner TUI, and First Choice cast uncertainty over the whole industry.

"You can argue whether regulators would allow the big four to go down to the big three," said Kepler analyst Mark Reed. "And so there must be even more of a question mark whether they will let it (the industry) go down to the big two."

TUI and First Choice said their combined business will be headquartered and listed in London, and 51 percent owned by TUI and 49 percent owned by the shareholders of First Choice.

The travel industry has had a torrid few years, with an oversupply of package holidays exacerbated by more people planning their own trips using budget airlines and the Internet.

First Choice Chief Executive Peter Long, who will also take up that position at TUI Travel, said the changing face of the industry meant he was confident competition regulators would clear the tie up with TUI's tourist business.

"We don't anticipate any issue, because the definition today of our market place is very different to what it was a number of years ago," he told reporters on a conference call.

First Choice shares leapt as much as 10 percent to a new high of 312 1/4 pence.

Kepler's Reed said First Choice was in a win win situation, as either regulators would block all major mergers in the sector, which would remove the new threat from a combined Thomas Cook MyTravel, or they would let the deals go ahead and the new TUI Travel business would be in a stronger position to compete.

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