Airtours raises pounds 250m for expansion plan

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The Independent Online
THE TRAVEL group Airtours yesterday announced that it will raise pounds 250m through the issue of a convertible bond, in order to expand its operations in Europe and the US.

David Crossland, the chairman, who reported a 17 per cent rise in full- year pretax profits to pounds 140m, said that there was little scope for further consolidation within the UK tour-operating industry.

The pounds 250m raised by the debt issue would be used to increase Airtours' distribution presence in the UK, and acquire operating businesses in the US and Europe, where it now does half of its business. Airtours said it would "take full advantage of opportunities as they arise".

Tim Byrne, the finance director, said that "consolidation was continuing apace in Europe. We want to be part of it, and need more equity to keep buying companies".

Mr Crossland said that despite talk of an economic slow-down demand for was still buoyant, with summer bookings increasing by 6 per cent compared to last year. But like other tour operators, Airtours is bracing itself for a possible drop in demand, and has decreased its 1999 seat capacity by 5 per cent.

Analysts remain positive about the industry as companies abandon their battle for market share in favour of profit.

Andrew Burnett, an analyst at Charterhouse Tilney, said: "While this is not yet a mature industry, it is beginning to act maturely." Describing Airtours' figures as "very strong," he said that the holiday sector was "counter-intuitive", with foreign holidays no longer the first "luxury" good to be jettisoned in the event of economic down-turn. He believes that British tour operators are "the best in the world," and with price to earnings ratios in the low teens, they offer fantastic value.

Another analyst said that Airtours' "management had proven themselves time and time again as innovative deal makers," with the unsecured convertible bond issue, underwritten by Merrill Lynch, representing an extremely cheap level of financing.

Dealers attributed the 5 per cent fall to 411p in share prices to profit- taking, following the 40 per cent rally of recent weeks. One analyst said that "this dip is an ideal buying opportunity".

Shares in rival operator First Choice rose 5.5p to 99.5p on the news that Airtours is seeking acquisitions.

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