Slowdown drives Avis to £32m loss

Avis Europe, the region's largest car rental agency, yesterday said it had made a loss for 2003 as business travellers were kept in the office and US holidaymakers stayed away from Europe.

Shares in the company fell as much as 6.6 per cent during the day before closing 4.3 per cent down at 94.75p as it revealed a €47.4m (£31.7m) pre-tax loss, compared with a €101m profit in 2002. The war in Iraq caused its corporate and leisure travellers to stay at home and the weakness of the dollar has put off US travellers coming to Europe.

There has also been a cut back in travel to far-flung destinations, such as the Far East, which was hit by the Sars epidemic and increased terrorism fears. Alun Cathcart, the acting chief executive of Avis, said: "Europeans are staying closer to home as destinations such as Bali and Singapore do not seem as safe as they were."

While its number of billed days, days on which its cars were rented, increased by 3.4 per cent, its revenue per day was 4.8 per cent down as the company slashed prices to win business. Customers, especially in the US, are proving slow to return and the company is expecting profits to be flat for the coming year. "We are not going to see much pick up in demand," Mr Cathcart said.

The company has also been hit by problems in Budget. In March last year it bought the trademark for the business in Europe, the Middle East and Africa after it had filed for Chapter 11 bankruptcy in the US, but the full scale of its financial difficulties are only now being unearthed. "They were reneging on obligations, unable to borrow money and cars were being sold to pay salaries," Mr Cathcart said, saying that he stood by the acquisition.

Mr Cathcart is to replace Sir Bob Reid as chairman of Avis. Murray Hennessy, the new chief executive who joins from John Lewis, will start on 1 May.