Tour operators MyTravel and Thomas Cook today announced plans to merge.
The proposed combination between Airtours owner MyTravel and German-owned Thomas Cook will create a new company called Thomas Cook Group, with its headquarters in the UK. The tie-up is planned for completion by June.
The proposals, which have been backed by the boards of both companies, are expected to result in cost savings of £75 million a year across the businesses.
Thomas Cook owner KarstadtQuelle will hold 52% of the new company, with the remaining 48% owned by the shareholders of MyTravel.
The firms said the enlarged operation would have leading positions in the UK and Ireland, Germany, Scandinavia, France, Germany and the Benelux countries, offering a strong platform for growth.
The new company will be led by a board drawn from MyTravel, Thomas Cook and KartstadtQuelle. It will be chaired by KartstadtQuelle chief executive Thomas Middlehoff, with MyTravel chairman Michael Beckett as his deputy.
MyTravel, which has a stock market value of £1.1 billion, employs more than 14,000 people worldwide. Last year the group took as many as six million people on holiday.
It announced a return to profitability in December, four years after nearly collapsing in a financial crisis. The company improved its fortunes by cutting costs and ensuring capacity was flexible enough to cope with fluctuations in demand.
In the year to October 31, MyTravel posted profits of £43.8 million compared with losses in the previous year of £17.4 million.
Thomas Cook is Europe's second largest travel group with 2,400 travel agencies, a fleet of 66 aircraft and a 20,000-strong full-time workforce.
Mr Beckett said: "This transaction gives MyTravel shareholders the opportunity to participate in the significant value creation being offered by industry consolidation.
"Thomas Cook is a household name and the joining of the two groups will create an even stronger force in this highly competitive market."
MyTravel chief executive Peter McHugh and Thomas Cook counterpart Manny Fontenla-Novoa will manage the business on an interim basis.