German losses prompt new Airtours profits shortfall

Airtours, the UK's biggest tour operator, yesterday warned of higher-than-expected losses at Frosch Touristik, its newly acquired German subsidiary, and said that one-off restructuring costs elsewhere in the group would this year reach £90m.

Airtours, the UK's biggest tour operator, yesterday warned of higher-than-expected losses at Frosch Touristik, its newly acquired German subsidiary, and said that one-off restructuring costs elsewhere in the group would this year reach £90m.

Shares in the company fell 4.5p to 215.5p. On Thursday, they slid 9 per cent to 220p - their lowest level since 1997 - prompting speculation that the contents of yesterday's trading statement had been leaked.

Following a detailed review of the FTi business, Airtours expects that full-year losses at the unit will be £20m higher than originally forecast. That would take the unit's total deficit to £100m. The group blamed "optimistic forecasting" by FTi's previous management and the "excessive levels" of costly, guaranteed accommodation which they had contracted.

The £90m exceptional costs for the current financial year, which ends today, relate to a group-wide reorganisation programme which has seen Airtours cut back its charter operations in Belgium and France and overhaul its North American business. The company plans partially to offset these charges through a series of sale and leaseback arrangements to release extra value from its hotel portfolio.

Tim Byrne, Airtours' managing director, said the restructuring costs and increased German losses would inevitably hit total profits this year. But he added that the company had not adjusted its internal forecasts for the year ahead.

Mr Byrne said he was not aware of how a rumour of a profit warning could have circulated on Thursday. He added: "All I can say is that, from our point of view, it is extremely damaging."

A spokesman for the Financial Services Authority would not comment on the specific case, but said: "As a matter of routine, if there is a significant share price movement, we always look into things."

This week's slump in Airtours' share price has reignited speculation that the group could become a bid target for the likes of C&N Touristic, the German group which lost out to Preussag in the £1.8bn battle to acquire Thomson Travel. Mr Byrne admitted: "Any public company is vulnerable when its share price falls."

Separately yesterday, Airtours said it had completed the sale of its 50 per cent stake in Costa Crociere, an Italian cruise ship operator, for a net cash gain of £235m.