German Tourism Giants Relaxed at the Prospect of Increased Competition

Germany's Preussag AG and Thomas Cook, Europe's two leading tourism concerns, were relaxed in their response to a landmark European Union ruling that industry insiders expect to speed up the process of consolidation on the European travel market. Both companies made it clear on Thursday that they are perfectly happy with their positions in Europe and on the key British market.

But Preussag chief Michael Frenzel is likely to view with some concern the prospect of his group's losing the leadership of the British market. And that will happen if MyTravel Group Plc and First Choice Holidays Plc act on Thursday's ruling by the Luxembourg-based Court of First Instance.

The court ruled that the European Union's competition commissioner, Mario Monti, was wrong to stop My Travel, which was then called Airtours PLC, from taking over First Choice in 1999.

But industry experts don't see the two companies making a second attempt at a merger. And MyTravel's response seems to bear out that view. "The situation has changed completely since 1999. The two firms are now completely different," said a company spokesman.

First Choice, meanwhile, said it "welcomes the decision, which will enable it to participate in any further industry consolidation."

MyTravel is currently the number-two player on the British market, behind Preussag's Thomson unit and in front of Thomas Cook. A merger with First Choice, the number-four player, would elevate it to the market leader.

The two German companies paid heavily for their strong positions in Britain. Preussag beat off its big rival C&N Touristik to acquire Thomson in a deal worth 3 billion euro.

C&N, a joint venture between airline Deutsche Lufthansa and retailer Karstadt Quelle, went on to acquire Thomas Cook, then a UK company, and took over its name, reflecting the renown of the company founder and inventor of the package holiday.

Neither company has completed the process of digesting its major acquisition. But experts are not ruling out the possibility that Thursday's ruling will send the two travel giants back into the mergers & acquisitions market.

Preussag has repeatedly said it would be interested in Switzerland's Kuoni if the Swiss company's complicated ownership structure could be changed. With Thursday's ruling, a takeover of this kind is likely to become a more straightforward affair.

Both Preussag and MyTravel welcomed the new opportunities opened up by Thursday's ruling. Preussag spoke of an increase in competitive freedom. And MyTravel chief Tim Byrne said the decision introduced clarity to the European regulatory framework conditions for takeovers.