The Competition & Markets Authority has raised potential concerns over the acquisition of Farelogix by Sabre.
The government body launched an in-depth investigation into the US$360 million deal in September and has now suggested it could result in less innovation, higher fees and more limited choice of supplier for airlines.
As a result, UK passengers would be worse off, the CMA said.
The provisional finding state that the continued independence of Farelogix will likely motivate Sabre to innovate further, giving airlines more choices in connecting to travel agents that will allow them to sell tickets and extra products through travel agents in more innovative ways.
The expected innovations will further benefit passengers booking by providing them with more options to customise their travel experience.
Martin Coleman, chair of the CMA inquiry group, said: “This is ultimately about passengers and their ability to get good value and innovative services when flying.
“For this to happen it’s really important that airlines have a good choice of supplier for this type of software solution to make sure services are cutting edge.
“Farelogix is at the forefront of a technological change in this industry and we are currently concerned that the merger will see airlines and their UK passengers miss out on the benefits from the continued innovation.”
Among other products and services, Sabre and Farelogix supply software solutions which help airlines sell flights via travel agents including those that operate online.
They do this by providing IT services that assist airlines in managing retail offers including information about in-flight add-ons to tickets such as seats with extra leg room, Wi-Fi and meals.
Additionally, Sabre and Farelogix offer solutions to help airlines connect with passengers via travel agents.
In responding to passenger demand, airlines want passengers booking via travel agents to have more choice over their flight experience by being able to select, for example, specific meals or seats with extra leg room.
Farelogix has developed technology that allows airlines to offer this choice to passengers.
Sabre does not currently offer this new technology but is investing in developing it.
However, the CMA is concerned that if Sabre buys Farelogix it will not have the incentive to develop the technology itself and airlines, and ultimately their passengers, will lose out as the companies will not be competing with each other to provide a better product.
A Sabre spokesperson questioned the findings and said: “While we note the CMA’s provisional findings, we strongly believe that no action should be taken by the CMA in this case because the CMA lacks jurisdiction and the transaction is pro-competitive.
“We continue to believe that the deal, far from resulting in any lessening of competition, is resoundingly pro-competitive.
“This transaction will serve the interests of airlines, travel agents and ultimately consumers.
“By bringing our two businesses together, we will accelerate access to next-generation retailing, distribution, and fulfilment products and services that the market needs.”
The CMA is consulting on the provisional findings and views are invited by February 28th.
Its current view is that blocking the merger may be the only way of addressing these competition concerns.