Airtours gives up First Choice chase ahead of EU veto

AIRTOURS FACED defeat yesterday in its bid to buy First Choice, its rival UK holiday operator, as the European Commission prepared to place a final block on the deal today.

Airtours, which has spent around pounds 4m chasing the First Choice acquisition, gave up its hopes of winning the Commission's blessing after its 11th- hour proposals were rejected.

Tim Byrne, Airtours' finance director, said: "It's looking pretty thin.... Everything we have tried to offer has met with a blank wall."

Mr Byrne said: "We are disappointed as this was the last real opportunity to buy a major player in the UK market. It was beholden upon us to have a run at it.... But that's life."

Stefan Rating, the EU's competition spokesman, said yesterday: "All there is to say about Airtours is that the time for any changes or proposals is up.... The Commission cabinet has already discussed a draft prohibition decision. They are in agreement about it and the recommendation will be formally adopted, without further discussion [today]."

Mr Byrne said Airtours had worked hard to give Europe what it was looking for - the creation of a fourth UK operator - but the company had been "caught up" in the Commission's desire to show strength in enforcing European laws on collective dominance.

He said the company had at first been confident the decision would go its way. However, the Commission decided to focus on the oligopoly aspects of the bid, arguing that the enlarged Airtours group, together with Thomson Travel and Thomas Cook, would dominate the UK market with their collective 70 per cent share. He said a decision to block the deal would have far- reaching implications for other European industries.

This will be the first merger decision by the EU's new chief of competition policy, Mario Monti. It will be seen as a sign that he is determined to be at least as tough as his predecessor, Karel Van Miert.

On Monday, Airtours is understood to have put forward formal proposals to the Commission to create a fourth force in the UK market, which a spokesman for the company described as "an independent entity, unconnected with Airtours, which would have a 10 per cent market share in its own retail outlets and its own airline".

Airtours said it was "appalled" that it had not been granted extra time to find a solution to the Commission's objections.

Airtours first bid pounds 850m for First Choice in April this year, but the offer was allowed to lapse after the EU opened a full inquiry into the proposed takeover in June. David Crossland, chairman of Airtours, had vowed to make a renewed bid if the deal won clearance from the Commission.