First Choice to slash holidays as demand slumps 25%

The tour operator First Choice warned that demand for its summer holidays had slumped by one quarter amid mounting fears of an imminent Iraqi conflict. It said it would slash the number of holidays on offer for the start of the summer season.

In a trading update, the company said it had seen a "challenging start" to the year but overall performance was in line with expectations. Its shares fell 2p to 67p, their lowest level for more than five years.

Peter Long, the chief executive, said: "Tanks around Heathrow, grenades arriving through Gatwick and subsequent higher levels of publicity about Iraq have had a significant impact on booking trends. [Bookings] have been running 25 per cent down during the past four weeks." He said the group, which relies on the traditional UK package holiday market for just over half its profits, would cut back capacity in May and June by 15 per cent.

Analysts said First Choice had proved it was well positioned to cope with a further downturn in the market. Last year, the group emerged relatively unscathed from the worst year for the industry since the 1991 Gulf War by reducing its exposure to fixed costs, such as aeroplanes, while MyTravel, its mass market rival, came close to collapse.

The group, which owns brands such as Unijet and Exodus Travels, said cumulative summer bookings at mainstream UK business were 4 per cent down on last year's levels although profit margins were slightly higher.