Departures: Airtours takeover

WITHIN the next week the Office of Fair Trading is expected to advise Michael Heseltine, President of the Board of Trade, whether the Airtours takeover bid for Owners Abroad should be referred to the Monopolies and Mergers Commission.

The main objection of Owners Abroad, Britain's second-biggest package holiday operator, to the proposed takeover by the third- biggest company, Airtours, is that the bid price is too low.

However, in addition, Owners Abroad, and several other interested parties, have complained to the OFT that the takeover would not be in the best interests of the consumer.

They argue (although this is vehemently disputed by Airtours) that a combined company would control a larger market share than Thomson, at present the biggest operator. This situation, it is suggested, would be likely to produce one of two outcomes. Thomson might respond to this challenge to its supremacy (as it did when it was threatened by Intasun eight years ago) by

embarking on a ferocious price war. While this might be good for the consumer in the short term, the resulting bankruptcies would eventually further diminish choice and competition.

Alternatively, say the opponents of the takeover, as Thomson and the combined group would between them control two- thirds of the package market, they could decide to benefit from their duopoly and fix prices to suit themselves.

Small independent operators are, moreover, concerned that Airtours might be planning to discontinue Owners Abroad's valuable charter seat-broking operation, thereby threatening their livelihoods.

The OFT and Mr Heseltine might decide, however, that the takeover would cause no great difficulties. In the course of the past 40 years, the travel trade has become pretty adept at adjusting to mergers, acquisitions and

failures.