Thomson backs down on holiday price war

THOMSON TRAVEL appeared to back down over its plans to launch an all-out holiday price war yesterday when it detailed a pounds 30m growth plan but said it would not be flooding the market with cheap holidays.

The move follows investor unrest over the company's reaction last week to Airtours' pounds 800m hostile bid for First Choice Holidays. At its annual meeting last week, Thomson pledged to defend its market leadership in UK package holidays, to raise capacity and to sell more discounted holidays through a new budget brand.

Yesterday the company claimed its original statement had not been fully understood by the stock market, which savaged Thomson shares.

Its clarification, issued as the company meets institutional investors this week, says Thomson will add a million holidays to its capacity over the next two years. But it said much of this would come from capacity lost from the Airtours-First Choice as they consolidate travel programmes, and from other operators.

"An Airtours/First Choice combination would lose volume early on, as will certain other competitors," Thomson said. The company "will replace this with additional capacity, supported by strong marketing and other investment".

The more measured tone appeared to calm Thomson shareholders. The shares rose 2p to 136.5p on the statement.

Airtours claimed Thomson's comments indicated that Thomson believed its bid for First Choice would be cleared by the competition authorities.

If cleared the deal would take the combined Airtours-First Choice ahead of Thomson to be the UK's leading holiday company. Thomson has regarded market leadership as a vital part of its success and has fought strongly to preserve it before. However, since the company floated last year it is in a more compromised position.

Analysts pointed out that if the combined Airtours-First Choice group does not lose some market share as a result of the merger, Thomson's move would result in a flood of extra holidays.

Airtours, which has muscled in on First Choice's planned pounds 1.5bn merger with Kuoni of Switzerland, closed 5.5p higher at 440p.