First Choice signals recovery in holiday sector as bookings rise

First Choice yesterday signalled that the holiday market was returning to normal after the disruption caused by September 11 as it reported a sharp drop in profits.

The tour operator, which described last year as the industry's toughest since the Gulf War, said summer bookings were 6 per cent ahead of last year while winter bookings were up by 3 per cent.

Peter Long, the chief executive, said he was "very pleased" with current trading, adding: "Customer booking patterns are returning to more normal levels."

Commenting on the likely impact of a possible war with Iraq, Mr Long said: "Our view is that it probably won't get much tougher than what we've been through in the last 12 months." He said the group would maintain capacity at this year's levels but could easily add more if the demand was there.

First Choice's performance contrasts sharply with that of its other quoted UK rival, MyTravel, which made an underlying loss of £73m last year after it unearthed a series of accounting disasters.

Mr Long, who has been focusing on building up First Choice's portfolio of specialist travel businesses, sought to draw a line under City speculation that he might launch a takeover bid for MyTravel, predominantly a mass-market player. However, he expressed interest in some of the group's specialist holiday brands, such as its Bridge and Cresta outfits which operate city breaks.

"Their business is not compatible with our strategy therefore we have no interest in MyTravel," Mr Long said. He said First Choice had not made an offer for either Bridge or Cresta, adding: "If there are that many venture capitalists who are interested in buying [MyTravel's] businesses, they're going to get them because they won't meet our criteria."

Asked what the main impact of MyTravel's problems had been on First Choice, Mr Long said: "The damage has been the sentiment towards our sector. It has taken a knock when we all came through initially [after 11 September] with a tick from the investment community." The group's shares rose 3p yesterday to 101.5p but they traded at 146.5p at the start of the year.

Mr Long said the group had benefited from the downturn in the aviation market thanks to a "glut" of Boeing 757s – its preferred charter aircraft – and its flexible operating leases. He said one lessor, when asked the price of two Rolls Royce engines, had "thrown the aircraft in for free".

First Choice reported pre-tax profits in the year to October of £45.5m, down 18 per cent on the previous year following goodwill payments of £21.4m and restructuring costs of £5.7m. Underlying profit was down 9 per cent at £72.5m, in line with City expectations.

Analysts said First Choice, which aims to generate half its turnover from mainstream package holidays and half from specialist activities, had proved the resilience of its business model.