Airtours heads off for pounds 250m spree

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The Independent Online
Airtours is planning a spending spree costing up to pounds 250m to expand its overseas operations to a targeted 50 per cent of profits. Sources close to the holiday company believe an early deal will be the acquisition of Signature, a Canadian tour operator currently owned by UK rival First Choice.

Airtours, which has bought two tour companies in Canada since 1994, has said it believes the Canadian market is too small to sustain three major tour operators and David Crossland, chief executive, is understood to have spoken to new First Choice head Peter Long about buying Signature, which might be worth up to pounds 50m.

Boosted by buoyant profit figures, announced yesterday for the year to September, Airtours has a strong balance sheet and is also planning a rapid roll-out of its successful fly-cruise operation in which it currently runs three liners in the Mediterranean and Caribbean. Airtours' largest shareholder, Carnival Corporation of the US, is credited with creating the fly-cruise market in America.

In the 12 months to September, profits rose 46 per cent to pounds 86.8m as sales increased by 30 per cent to pounds 1.72bn. Earnings per share of 45.6p (32.8p) allowed a 14 per cent increase in full-year dividend to 16p (14p).

Mr Crossland said: "In a short period of time, Airtours has transformed itself from a purely UK-based company into an internationally diversified leisure group. These results show the group is in excellent condition."

Profits from overseas operations, which as well as Canada include a Scandinavian business, represented 42 per cent of the total in the latest trading year compared with 18 per cent in 1994. In 1993 all the profits came from UK holidaymakers.

The growth of the overseas operations helped cushion Airtours from the disastrous summer of 1995 when overcapacity caused a collapse in prices for late-booked holidays and a sharp fall in profits across the industry.

That experience led Airtours to cut capacity for this summer's holidays by 12 per cent, which was the main reason behind higher profits. Mr Crossland said the industry proved to itself that it could make more money by selling fewer holidays and he believes there has been a sea change in the hitherto highly cyclical and volatile business.

Capacity for summer 1997 holidays is forecast to remain at this year's lower levels and with bookings back to the levels achieved by this point in 1994, Mr Crossland said another good year was in prospect.

Airtours' good figures came only weeks after the Department of Trade and Industry said it was launching a Monopolies and Mergers Commission investigation into the UK holiday industry where the close ties between tour operators and the travel agents that sell their holidays have been seen as being anti-competitive. Airtours owns Going Places, both number two in their respective fields.