MyTravel says First Choice mainstream is ‘one of a number of opportunities’

MyTravel has cut UK operating losses and confirmed that the possible acquisition of the First Choice mainstream holiday arm is one of a number of opportunities being considered.

Revealing a 53% reduction in operating losses for UK operations to £12.9 million, chief executive Peter McHugh said: “The possible acquisition of First Choice’s mainstream business and certain related operations is one of a number of opportunities were are evaluating.”

The group said it had no further comment to make on this potential acquisition.

The group, which emerged from a financial restructuring two years ago, announced a return to the black for the first time since 2001 in the year to October 31 with pre-tax profits of £43.8 million against a loss of £17.4 million the previous year.

Increased prices of fuel and foreign currency cost the group £48.3 million. Costs in the UK soared by £31.8 million, so the group was unable to return its UK arm to profitability despite “substantial and continued progress”.

MyTravel said the overall return to profitability came despite a difficult summer, particularly in the UK, which was compounded by the August security alert and terrorist incidents in Turkey and Jordan. Summer market conditions in the UK were already difficult due to the World Cup and record high temperatures in Britain. As a result MyTravel had 300,000 holidays left to sell by the start of August.

“Following the UK security alert in August there was a significant fall in demand for the remainder of the summer and as such prices had to be heavily discounted to stimulate sales,” the company said. “This resulted in average selling prices achieved in August, September and October for travel in those months being 10% below the prior year.”

An accelerated cost cutting programme in the UK resulted in £54.4 million in savings.

Capacity for winter has been cut by 10% due to “challenging” trading conditions in the UK with cumulative bookings down by 9% but an average selling price up by 4%.

Summer 2007 trading in the UK has started slowly with bookings down by 11% on an exopected capacity reduction of 5%. Bookings have been in line with last year over the past eight weeks.

Looking ahead, the group said: “We continue to target an operating margin of 3.5% in the UK but only a significant improvement in market conditions will allow us to achieve that traget in 2007.”

It added: “The group continues to make good progress in improving the quality of its product offering, the differentiation of these products, the move to the internet, the employment of CRM tools and cost cutting.”

Report by Phil Davies