Airtours faces further slump

JOHN SHEPHERD

Airtours yesterday revealed the full extent of the damage it suffered this summer, when holidays had to be sold at less than cost in an attempt to persuade people to go away despite the unusually hot weather at home. Profits before tax for the year to 30 September plunged from pounds 75.8m to pounds 59m.

Airtours now faces a critical three months as the post-Christmas booking period nears. It has cut capacity for next summer by 14 per cent to 1.8 million. Bookings to date, however, are very slow and are running at 25 per cent less than the same time last year.

Tour companies are suffering from the lack of a feelgood factor. Job insecurity and the lacklustre Budget, which put little extra cash into people's pockets, have kept the market depressed.

Hundreds of jobs have been cut this year across the industry, and analysts predict that hundreds of small tour operators and travel agents will go out of business.

The smaller operators have found it increasingly difficult to pass on the rises in hotel charges in Spain and Greece in the last two years. While there are signs that Greek hoteliers are prepared to cut charges to win back lost custom, prices in Spain are rising again. The continued strength of the French franc is also deterring holidaymakers from venturing to the UK's most easily reached foreign destination.

David Crossland, chairman of Airtours, said prospects for 1995/96 depended on the willingness of UK tour operators to ensure that capacity was held in line with demand.

Besides the summer's hot weather, the industry paid the price for the policy over the last two years of chasing market share by slashing prices. Profit per customer at Airtours this summer crashed from pounds 19.85p to pounds 9.37p.

Brochure prices for next summer have been increased by around 7 per cent, but customers can still book a holiday for next summer for the cost in real terms of package tour taken in 1993.

Mr Crossland warned that the industry had to aim to balance demand with supply to rebuild profit margins. "We are not stupid enough to carry on operating it wrong," he added.

One of the main problems facing the industry is the high number of people who leave it until the last minute to book.

Airtours is increasing its total dividend for the year by 16.7 per cent to 14p, through a final payment of 11p. Earnings per share were 34.7p, down from 49.2p.

Investment Column, page 22