Job fears as Thomas Cook and Co-op merge travel businesses

Ailing Thomas Cook will this week launch a publicity drive in a bid to reassure customers (2010 Getty Images)

Thomas Cook and the Co-op unveiled plans today to merge their high street travel businesses in a move expected to cost hundreds of UK jobs.

With more than 1,200 shops, the newly-formed company will be the UK's largest travel agent and second biggest in foreign exchange.

The tie-up will enable Thomas Cook to streamline costs in the face of a sluggish travel industry and expected period of weak consumer spending.

Savings of around £35 million a year from the merger are expected to be achieved through job losses, store closures and the combination of existing head offices into Thomas Cook's current Peterborough HQ.

It is feared that hundreds of jobs will be lost through the merger.

The Usdaw union said it planned to hold talks with the new company in the coming months in a bid to secure as many jobs as possible.

Staff at Co-operative Travel, which started life as a day excursion business in 1905, are based at the head office in Burslem, Stoke-on-Trent. The company also operates call centres in Manchester and Barrow, in Cumbria.

Peter Marks, chief executive of the Co-operative Group, said it was too early to confirm store closures and the number of job losses among the combined workforce of around 9,000 staff.

He said: "This is really about job creation and protection, but yes of course, by combining the two head offices there will be some job losses."

Mr Marks added: "This is a marriage of two of the industry's most trusted brands - The Co-operative and Thomas Cook. And, it comes at a time when consumer confidence in the travel sector, like the economy, is in need of a boost."

Co-operative Travel, which employs 3,000 staff, will also include its home-working business, which has 345 staff selling holidays from home, its web and call centre operations and Freedom Travel, its franchise group.

Thomas Cook, which will own 70% of the new company, is struggling with a drop in demand for overseas holidays, as anxious Britons opt to stay at home.

Last month, the group confirmed it was reviewing its total UK workforce of between 13,000 and 15,000 staff, as well as its supplier base and all divisions in its UK arm, in a bid to cut costs.

Manny Fontenla-Novoa, Thomas Cook Group chief executive, said: "Today's announcement together with our plans to cut costs and streamline the rest of the UK business, will put us in a much stronger position, should market conditions in the UK remain weak, and will build a firm foundation for the future."

The Thomas Cook businesses within the scope of the merger only made up 3% of the group's £9.3 billion total revenues in the year to September 2009.

As well as its UK high street network, the group, which can be traced back to the mid 19th century, operates in 20 other countries, running holiday tours, cruises and 94 aircraft.

Thomas Cook and Co-operative Travel stores will continue to operate under their own brands, but Thomas Cook's Going Places shops will be rebranded as Co-operative Travel.

The deal is subject to regulatory approval, but the companies hope the tie-up will be completed in early December.

The Midlands Co-operative is also expected to join the deal as well, adding a further 103 stores to the portfolio. The addition, to be confirmed in the next two weeks, would give Midlands Co-operative a 3.5% stake in the new company, to be taken from Thomas Cook's share.

Analysts viewed today's merger as a good move.

Nick Batram, analyst at KBC Peel Hunt, said today's deal will go a long way in improving Thomas Cook's cost base within its UK business.

He said: "In addition to the cost savings other benefits should be derived for the broader tour operations."

Simon French, analyst at Panmure Gordon, said the merger was a "positive development".

Under the merger, the two companies will have a combined 4.3 million customers, and each company will contribute their entire retail estates, comprising 803 and 401 shops respectively, together with foreign exchange and cruise operations.

Mr Fontenla-Novoa will serve as chairman to the new company, and Ian Derbyshire, current chief executive of Thomas Cook UK, will be chief executive.