Avis and Airtours fall victim to slump in tourism

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The fallout from last week's aeroplane hijackings in the US on the leisure sector became clearer yesterday as Avis Europe and Airtours warned that fear of flying would hit their bottom lines.

Shares in Avis Europe plunged 13 per cent to 103p after it warned that the collapse in airline passenger numbers had slashed demand for its rental cars. Airtours waited until after the market had closed to warn that its year to end of September profit would take a hit of £10m because of last week's events. Its shares fell nearly 19 per cent to 110p.

Avis Europe, run by chief executive Mark McCafferty, said long-haul rental sales to customers arriving from outside Europe had slumped by 30 to 35 per cent since the terror attacks. Airport rentals provide about half of its revenue. Of this, 15 per cent comes from long-haul customers. Avis, which broke the news yesterday at a series of investor meetings, said corporate volumes, which contribute 27 per cent of group revenue, were down 10 per cent in the last 10 days. Airtours said it was too early to predict any booking patterns. It added that experience from the Gulf war had shown that passengers tended to postpone rather than cancel their holiday bookings.

Analysts said the knock-on effect of fewer flights was likely to have a major impact on Avis' business. Virgin Atlantic has cut its seat capacity by one-fifth and British Airways by 10 per cent.

Roger Tejwani, an analyst at WestLB Panmure, said: "In the short term, corporate and leisure rental will be hit. Fewer people will want to fly on holiday or on business."

Avis said it will cut its fleet size and stop hiring new staff, in an effort to cut costs. Avis hopes to benefit from increased car rentals as passengers who might have preferred to fly before last week's events chose to drive instead. It said it had seen "some signs of increased demand from customers seeking alternatives to air travel".