Tour operator First Choice Holidays has approached its peak season in upbeat mood after unveiling reduced losses for its quieter winter period.

The Crawley-based group, whose brands include Unijet, Falcon and Sovereign, reported demand for holidays this summer was expected to be in line with supply.

The comments come despite a challenging market for the mainstream holiday sector - a situation that has led rival MyTravel into financial difficulties over the past two years.

First Choice said its position had been helped by investment in niche markets and by its adoption of a more flexible business model to adapt to changing trends.

During the company's normally loss-making six months to April 30, First Choice recorded a deficit of £39.9 million, against £44.1 million last time.

Winter losses in mainstream holidays, one of four sectors covered by the firm, reduced by five per cent to £32.7 million as it focused on driving up earnings through the growth of medium and long-haul destinations.

Strong trading in the specialist destinations sector helped turn last year's losses for the division into profits of £1.9 million while the underlying performance of the activity holidays arm was described as strong.

But losses for that division widened slightly to £5.7 million because of the planned reduction of low margin and unprofitable ski revenues.

For the summer, activity holiday bookings are running eight per cent ahead of last year.

In the fourth sector of online services, First Choice put losses of £300,000 down to the cost of product developments and the opening of new offices.

Group turnover for the six months was £776.2 million, against £756.1 million last time while losses, after exceptional items, were £50.9 million, down from £55.1 million a year earlier.

Chief executive Peter Long said trading so far this summer had been positive.

He said: "We have had an encouraging start to the second half, with summer bookings for our mainstream holidays sector broadly in line with last year at similar margins."

First Choice will increase its half-year dividend by nine per cent to 1.75p a share.

Wednesday June 09, 2004