Tour operator Airtours unveiled a new management set-up after profits dived on the back of a poor performance by its German operation.

Stripping out tax and exceptionals, profits for the year fell from £131.5 million to £101.3 million, although turnover rose 18 per cent to £4.43 billion.

Company founder David Crossland announced he is to step down as chief executive and concentrate on a strategic role as executive chairman. Managing director Tim Byrne will take over day-to-day running of the company.

The company, which has been the subject of takeover speculation in recent weeks, has also appointed a new chief executive to take charge of its troubled German subsidiary Frosch Touristik.

Airtours, which employs more than 29,000 people, fully acquired the division in September but has seen margins hit by overcapacity in the German market and operational inefficiencies.

The company, which previously had a minority stake in FTi, said it incurred a pre-exceptional loss of £38.3 million on its German interests this year, compared with £8.9 million last time.

Demand also dwindled in Airtours' key market of Scandinavia, where high fuel prices and poor demand over the millennium period dented bookings.

Coupled with the Dutch business, continuing operations in Europe generated profits of £11 million before exceptionals, against £41.7 million last time.

However, turnover from Airtours' UK operations rose 19 per cent to £2.18 billion and was buoyed by an increase in business at Direct Holidays and Panorama Holidays.

The successful summer season, with an increased number of holidays sold at higher prices than the previous year, helped offset the effect of a disappointing millennium period.