First Choice bid leads to fall in Airtours profits

First Choice bid leads to fall in Airtours profits

THE cost of bidding for First Choice and a fall in interest rates dented Airtours' third-quarter profits by almost £6m as the City revised its year-end profit forecasts for the operator.

In the three months to June 30, Airtours revealed it spent £2.8m on the First Choice bid - which is expected to rise to £4m - while a drop in interest rates wiped a further £3m off profits.

The costs emerged as the operator announced pre-tax profits of £20.5m for the quarter - which includes the bid costs - compared to £24.6m for the same period last year.

Before goodwill and bid costs, Airtours made a loss of £3.7m for the nine months to June 30 compared with a profit of £1.4m in the same period last year. The announcement prompted the City to trim its year-end estimates by £2m to £155m.

Profit forecasts for 2000 remain at £175m.

In the UK, tour operating profits dipped from £16.8m to £10.8m with poor trading conditions in May partly to blame.

Group finance director Tim Byrne said:"It was a terrible month. We were discounting and load factors were under pressure. Interest rates also came down which had a direct impact on earnings."

Distribution costs were also higher than expected which Byrne put down to higher commission rates and the roll-out of Going Places' Matchmaker system. He declined to reveal the cost figure.

Tough conditions in the UK were partly offset in Scandinavia where less capacity resulted in higher prices.

"The balance in Scandinavia is right," said Byrne.

The Kosovo crisis impacted on its joint operation with Costa Cruises which saw profits dip £300,000 to £3.6m in the third quarter.

Rapid expansion in Germany with FTi produced losses of £2.6m compared to a 1998 profit of £500,000.

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