Thomson
Travel Group and Horizon Travel Ltd: A report on the merger
situation.
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Summary
On 14 September 1988 the Secretary of State for Trade and
Industry requested the Commission (see Appendix 1.1) to investigate
and report on the acquisition of Horizon Travel Ltd (Horizon)
by International Thomson Orgnisation Ltd (ITOL) from Bass
PLC. ITOL is a Canadian-based
enterprise, one of whose major interests is Thomson Travel
Group (TTG), which is based in the United Kingdom and very
largely active there. The Commission unanimously conclude
that the merger may be expected not to operate against the
public interest.
The merger took place on 18 August 1988, before the reference
was made. At that time, TTG and Horizon held respectively
the first and third largest shares in the United Kingdom market
for foreign air inclusive tours (AITs). Each also operated
its own airline, Britannia Airways and Orion
Airways respectively, devoted largely to the charter trade
which carries the vast bulk of AIT passengers from the United
Kingdom; and each ran a chain of retail travel agents, TTG's
(Lunn Poly) being one of the largest in the country and Horizon's
quite small. The AIT business is a highly competitive one,
and profit margins tend to be low, and sometimes non-existent.
In the
charter airline business, however, they are higher. Horizon
had made a loss on its holidays for several years, and was
relying on the profits from its airline for survival. In 1987
TTG had 30 per cent of the AIT market, and Horizon 8 per cent,
while the second largest tour operator (International Leisure
Group PLC) had 14 per cent.
The reasons for our decision are set out in detail in Chapter
6. The effects of the merger on leisure travel by air and
on the retail travel agency business seem to us clearly insignificant.
A stronger case was put to us in regard to the tour operating
business, and in respect of the advantages of vertical integration
between the three sectors. However, we have concluded that
these markets are at present characterised by strong if variable
growth, extensive competition, and continued entry by firms
new to the industry. We do not believe that the merger will
sufficiently reduce competition as to cause any adverse effects
on price, choice or standards of service, in any of these
sectors.
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