MyTravel cuts losses but warns on trading
Saturday 29 May 2004
Mytravel, the holiday company struggling to manage its debts after a disastrous over-expansion plan, yesterday said its losses had narrowed, but said trading conditions in the UK market remained tough.
Peter McHugh, the chief executive of the company formerly known as Airtours, said margins were still under pressure at the group, particularly in the UK, where customers are still holding back on booking their holidays.
But after losses of £913m last year, the MyTravel said improvements were underway and it would return to profit in 2005. Losses for the six months to the end of March came in at £199m, compared with £617m in the same period last year, as bookings picked up in North America and northern Europe.
MyTravel's problems during the global downturn in tourism were exacerbated by its decision to increase capacity, choosing to buy aircraft, cruise ships and hotels in an attempt to take market share. But when demand plunged as economic uncertainty prevailed, MyTravel was left with high fixed costs and unsold holidays.
After refinancing about £1.3bn of debt and axing 2,000 jobs, cost-cutting is still paramount to the company. Mr McHugh said MyTravel would reduce the amount of guaranteed accommodation it books up in advance. It is also selling another of its aircraft this year. Four cruise ships are also being sold off as it plans to exit its cruise-line operations.
While there are signs of some improvement in the business, debts rose to £877m from £672.6m at 30 September. Its balance sheet is in need of further restructuring and the company reiterated its warning that this could result in a "very significant dilution of the interest of shareholders".
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