The holiday industry has suffered over the last two years

The Sunday Telegraph reported that the two companies were discussing a tie-up which would create the world's biggest holiday company.

The report said the merged group would be listed in Kuoni's home country of Switzerland, but retain large operations in the UK and Germany.

It also reported Stefan Pichler, the chairman and chief executive of Thomas Cook, would become head of the new company.

The paper said talks between the two parties started in March when they got together to discuss combining some of their airline operations.

'Rumours and speculation'

However, on Sunday, Kuoni said no merger talks had taken place when the two companies had got together.

Spokesman Stephan Wehrle said: "We do not comment on rumours and speculation. There are no talks between Thomas Cook and Kuoni.

"We had talks not only to Thomas Cook but also to others, which is quite normal in this industry, in March, but not regarding a merger."

A Thomas Cook spokeswoman said: "We do not comment on market rumours and speculation."

Kuoni has previously tried to merge with UK holiday group First Choice in 1999, but talks ended following a counter bid from Airtours, now known as MyTravel.

Thomas Cook last month announced plans to axe 600 jobs as part of cost-cutting measures meant to offset a weak economy and a drop in bookings.