Riccardo Gullotti, who was going to be chief executive of the enlarged group, will have his five -year contract paid up in full as he steps back to a non-executive role. Three other Kuoni directors are being paid pounds 734,000 for the "termination" of their service contracts even though all three will stay on at the group in executive positions.
Peter Long, First Choice's chief executive, who will take on Gullotti's role as head of the enlarged Kuoni, said: "They have different contracts in Switzerland. The numbers are very big. We can't hide from that. But this is a one-off."
The pay-offs are part of a plan to slim down the board of the combined company from 14 to 10 directors. Ian Clubb, First Choice's chairman, will receive pounds 543,000 in compensation in return for moving to non-executive deputy chairman.
"The shareholders we have visited like the deal,'' Mr Clubb said. "We said earlier that a 14-strong board was a bit too big but it would reduce over time. We decided simply to do so earlier and hand over to the youngsters.''
First Choice shares, which have risen on the prospect of a hostile bid from Airtours, closed 6p lower at 191p.