MyTravel warns on profits after terror scare

MyTravel, the tour operator, warned yesterday of fresh losses at its UK business after last month's terrorism scare deterred holidaymakers. Its shares tumbled 12.75p, or 6.4 per cent, to 188p.

The company, which generates about 60 per cent of its profits at its British arm, said the recent security alerts in the UK and terrorist attacks in Turkey and Jordan had "compounded an already difficult summer". That forced it to revise its earlier expectation of a return to profit for the UK business. It now reckons the division will remain in the red and post an operating loss of £10m to £15m this year, compared with £27.4m last year. The company is also being hit by soaring fuel prices and foreign currency effects.

The chief executive, Peter McHugh, said: "While we are disappointed that we will not achieve this year's target in the UK, we are taking the actions required to complete the turnaround. We believe the UK will return to a more typical trading environment in 2007."

The UK's poorer-than-expected performance will hit the group's overall annual profits, which are now expected to be £55m to £60m, compared with previous company estimates of £75m to £85m.

Despite the problems, MyTravel expects it will still make its first profit before tax since 2001 - estimated at £40m to £45m - against a pre-tax loss of £17m last year.

MyTravel said winter trading at the UK arm had started slowly, with charter holiday bookings down by 11 per cent, while the average selling price was up by 4 per cent.

In Northern Europe, bookings have fallen by 6 per cent, though the drop was mitigated by a 15 per cent increase in the average selling price. The company said it was too early to assess winter bookings at its North American arm.

The business was hit by August's security alert in the UK after an alleged plot to blow up planes flying to the US was uncovered. Tightened security led to hundreds of flights being cancelled and thousands of travellers being stranded at airports around London, causing chaos. The company had already suffered difficulties over the summer and blamed the World Cup in Germany for a slowdown in holiday bookings. Mr McHugh said more people would go on holiday next year as there will be no major football tournament.

MyTravel said the UK problems had prompted it to speed up its cost-cutting programme, including cuts to its marketing spending, and it now expects to "significantly" exceed its targeted reduction for this year of £30m to £40m.

The company, which used to be known as Airtours, has managed to turn itself around after nearly going bust two years ago.