MyTravel narrows losses
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MyTravel narrows losses
BBC NEWS 28/05/04
Holiday firm MyTravel has managed to cut its losses - but warned it is still battling tough market conditions.
The firm revealed it had narrowed its pre-tax loss to £199.6m ($364.5m) for the six months of the year, from £617.9m for the same period in 2003.
The group is currently struggling to manage its debts after a disastrous expansion drive and accounting errors.
Chief Peter McHugh said the turnaround of the business is "well underway" but may take longer than expected.
Mr McHugh added that the level of losses remained too high for the winter period.
High costs
The UK division had a "difficult start" in May with further evidence that customers were leaving their bookings until later. Travel firms are still fighting to recover from a drop in tourism during the recent economic downturn - which has been exacerbated by terrorism fears.
MyTravel, formerly known as Airtours, was hit harder than most firms during the slump as it had ramped up capacity - buying aircraft, hotels and cruise ships - in an effort to grab market share.
As a result the Rochdale-based firm was lumbered with high fixed costs and was forced to cut prices for its unsold holidays as demand sank.
Since then the firm has restructured its debts, axed around 2,000 jobs, brought in new management and sold off businesses - including its loss making cruise ship fleet and German business.
On the up?
Mr McHugh added that the group had made good progress with restructuring its UK charter and distribution business, and is continuing to cut costs and improve its performance.
"Although there is still more to be done, we are ahead of schedule on delivering the cost savings and believe that they are now likely to exceed the target of £150m in 2005," he said.
But MyTravel hailed its achievements in its North American and Northern European markets, adding that bookings were encouraging.
In the first half, the Northern Europe division made an operating profit before one-off costs of £5.5m , turning around a £25.2m loss from last timer.
Meanwhile, in North America operating profits rose to £98.5m from £2.9m - largely thanks to its Canadian business.
Holiday firm MyTravel has managed to cut its losses - but warned it is still battling tough market conditions.
The firm revealed it had narrowed its pre-tax loss to £199.6m ($364.5m) for the six months of the year, from £617.9m for the same period in 2003.
The group is currently struggling to manage its debts after a disastrous expansion drive and accounting errors.
Chief Peter McHugh said the turnaround of the business is "well underway" but may take longer than expected.
Mr McHugh added that the level of losses remained too high for the winter period.
High costs
The UK division had a "difficult start" in May with further evidence that customers were leaving their bookings until later. Travel firms are still fighting to recover from a drop in tourism during the recent economic downturn - which has been exacerbated by terrorism fears.
MyTravel, formerly known as Airtours, was hit harder than most firms during the slump as it had ramped up capacity - buying aircraft, hotels and cruise ships - in an effort to grab market share.
As a result the Rochdale-based firm was lumbered with high fixed costs and was forced to cut prices for its unsold holidays as demand sank.
Since then the firm has restructured its debts, axed around 2,000 jobs, brought in new management and sold off businesses - including its loss making cruise ship fleet and German business.
On the up?
Mr McHugh added that the group had made good progress with restructuring its UK charter and distribution business, and is continuing to cut costs and improve its performance.
"Although there is still more to be done, we are ahead of schedule on delivering the cost savings and believe that they are now likely to exceed the target of £150m in 2005," he said.
But MyTravel hailed its achievements in its North American and Northern European markets, adding that bookings were encouraging.
In the first half, the Northern Europe division made an operating profit before one-off costs of £5.5m , turning around a £25.2m loss from last timer.
Meanwhile, in North America operating profits rose to £98.5m from £2.9m - largely thanks to its Canadian business.
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Doesn't sound good news to me.
The comments regarding taking longer than expected to turn the business around will alarm its financial backers I would imagine as will the "difficult start" at the onset of the summer season in its UK division.
Good luck to all involved at MyTravel and heres hoping that the financial backers will display some patience.
The comments regarding taking longer than expected to turn the business around will alarm its financial backers I would imagine as will the "difficult start" at the onset of the summer season in its UK division.
Good luck to all involved at MyTravel and heres hoping that the financial backers will display some patience.
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Sounds like good news to me.
We're all working hard here and these results show some progress. Don't forget that the reporting period in question is the traditionally lossmaking winter period. That's not meant to sound complacent, just a statement of the fact. Perhaps a look at the results of our competitors will reveal the difficult state of the market. But since those competitors report to the german market I doubt we'll ever really know this far down the food chain.
Lets keep our noses to the grindstone at Kestrel. We can't do much more at our level.
We're all working hard here and these results show some progress. Don't forget that the reporting period in question is the traditionally lossmaking winter period. That's not meant to sound complacent, just a statement of the fact. Perhaps a look at the results of our competitors will reveal the difficult state of the market. But since those competitors report to the german market I doubt we'll ever really know this far down the food chain.
Lets keep our noses to the grindstone at Kestrel. We can't do much more at our level.
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I think you're right Bernoulli - most of the charter operators are struggling at the moment. The low cost airlines have ensured that the market place is much tougher and is changing emphasis.
I'm sure MyTravel aren't the only ones finding trading difficult this summer. But if the summer hasn't started well it doesn't bode well when approaching the money men for further financing given the current state of the groups' debt.
I'm sure MyTravel aren't the only ones finding trading difficult this summer. But if the summer hasn't started well it doesn't bode well when approaching the money men for further financing given the current state of the groups' debt.
Traditionally when companies go for a big expansion and then get into trouble, it's the new activities (and the money borrowed to pay too much to buy them) that are the problem. Established areas (in MyTravel's case the UK airline and the UK travel agency business as well) are generally worth continuing, even if under new ownership (ie sell off the good bits, let the rest go).
The later booking trend doesn't show up as reduced profitability under conventional accounting, although it hits the cash flow and thus the balance sheet. So the continuing losses are caused by still keeping parts of the business not worth keeping. Bear in mind that the £617m loss for last year, plus the £200m loss for this year, plus all the other losses, plus the money borrowed to fund the past acquisitions, will all need to be paid back somehow.
I still think there's a case for breaking the business up into worthwhile and not worthwhile sections, and putting the UK airline in the former. It would need a new name, of course. Any suggestions ? Possibly one beginning with A------- ??
The later booking trend doesn't show up as reduced profitability under conventional accounting, although it hits the cash flow and thus the balance sheet. So the continuing losses are caused by still keeping parts of the business not worth keeping. Bear in mind that the £617m loss for last year, plus the £200m loss for this year, plus all the other losses, plus the money borrowed to fund the past acquisitions, will all need to be paid back somehow.
I still think there's a case for breaking the business up into worthwhile and not worthwhile sections, and putting the UK airline in the former. It would need a new name, of course. Any suggestions ? Possibly one beginning with A------- ??
