Three of Europe's biggest travel firms, including Britain's Thomas Cook and TUI, are considering merging their low-cost airlines in Germany.

TUI Travel, Lufthansa and Thomas Cook are looking at lumping together TUI Fly Germany, Condor, owned by Thomas Cook, and Lufthansa's Germanwings in a deal aimed at securing cost savings.

London-listed Thomas Cook issued a statement confirming the talks today after German press speculation. Lufthansa and TUI began negotiations last year over a tie-up of their airlines. Thomas Cook and independent German operator Air Berlin also started talks.

The Thomas Cook-Air Berlin deal became mired in regulatory problems, and now Thomas Cook has decided to see if it can get involved in a three-way deal with the two other rivals.

Thomas Cook sources said it had still not ruled out the original deal with Air Berlin but analysts said today's statement looked like such a deal had been all-but abandoned.

Analysts have long been predicting a flood of consolidation in the airline industry as firms seek safety in each other's arms.Thomas Cook today said it is in “early discussions” with Lufthansa and TUI over a merger of the three businesses.

It warned, however, that no terms have been agreed and there can be no certainty the deal will go ahead.