Airtours was forced to switch its cruise ship, MS Seawing, away from Egypt following the terrible scenes at Luxor, where Muslim militants killed 58 foreign tourists and four Egyptians.
The ship is now based in the Canaries. However, the last-minute switch forced Airtours to offer cut-price deals to fill capacity, which hit margins.
"We decided to pull out of the area due to concerns from our customers. We recovered some of the losses by moving the ship to the Canaries. But sales of the new holidays were not as strong as we hoped," an Airtours spokesman said yesterday.
Despite the set-back, overall UK holiday sales for the three months to December rose 8 per cent as more Britons chose to jet off to catch some winter sun.
Airtours has not seen any negative effects from the growing Iraqi crisis. But the group said that war in the Middle East could have a knock-on effect on holiday destinations such as Cyprus, Turkey and Tunisia.
Airtours' first-quarter losses rose to pounds 17.3m (pounds 12.1m). The group traditionally makes losses in the first half of its financial year, which cover the quieter holiday months. However, the losses were higher than analysts expected.
Airtours blamed further problems at the group's Scandinavian tour business. Engineering problems and a lack of available planes delayed flights and added to costs. Airtours has also increased discounts to more than 20 per cent on a number of holidays which, in the past, have proved difficult to sell until the last minute.
But the group denied kick-starting a price war or flooding the market with more capacity. "This is just tactical discounting and their has been no significant increase in capacity from the major tour operators," the spokesman said.
Airtours' expansion in North America, where it has recently set up a business in Florida, also lead to higher seasonal losses. The group said its holiday business in Canada, which has proved a difficult market in recent years, was finally showing signs of recovery.
Airtours is keen to expand its European business and is believed to be among the front-runners to buy a stake in LTU, Germany's third-largest package holiday group, which has been up for sale by Westdeutsche Landesbank. But the deal is sale is still being examined by the German cartel authorities.Reuse content