Airtours casts gloom over market

A GLOOMY assessment from Airtours of the late summer holidays market sent travel shares into a tailspin yesterday.

Shares in First Choice Holidays fell more than 5 per cent to 163.5p yesterday after the Airtours chairman David Crossland hit out at Thomson Travel, claiming that discounting by the UK market leader for package holidays could distort the late summer sales market. Airtours' shares fell to 412p from 419.5p.

Announcing a dip in his company's third-quarter profits and losses of pounds 5.3m during the nine months to 30 June, Mr Crossland said: "We are pleased with our UK performance but conscious of comments made by our major competitor regarding the use of increased discounting to sell its remaining holiday capacity."

A First Choice spokesman said his company was "happy" with its pounds 60m full-year profits forecast, made earlier this year.

Thomson issued a profit warning last month and said increased discounting was needed to sell its summer 1999 holidays to UK customers.

As well as tough market conditions, Airtours' profits were also hit by the pounds 2.8m costs incurred from its pounds 950m abortive bid for First Choice. Airtours allowed the bid to lapse after the European Commission opened an antitrust investigation.

Airtours' underlying third quarter profits before tax, good will amortisation and bid costs fell to pounds 23.6m, down pounds 1m from the same period a year ago. But turnover was up 19 per cent at pounds 970m. In July, Airtours said it would "vigorously" press on with its efforts to buy First Choice. The company may bid again once the outcome of the EC inquiry is announced in October. But analysts say the deal could be scotched by the level of concessions Airtours would have to make.

Switzerland's biggest travel company, Kuoni, has already failed in its bid for First Choice after its no-premium merger offer was rejected by the UK group's shareholders.