First Choice escapes from package holiday gloom

First Choice, the tour operator, is developing new technology to allow tourists to design their own package holidays online, taking on the twin threat of internet companies such as Lastminute.com and low-cost airlines such as Ryanair and easyJet.

The company, which announced record operating profits yesterday of £87.1m for 2003, said customers would be able to pick and choose their own First Choice holidays from next year.

Peter Long, the chief executive, warned that the new breed of online travel company would not be having it all their own way in future.

"We will put in place the technology to deliver DIY packages within the next year," he said. "However, we will not be cannibalising our existing customer base because certain holidays will remain exclusive to our brochure-based business and our other, more specialist tour operations."

First Choice's results for the year to October 31 were a rare bright spot for the package holiday industry, which has been hit by the economic downturn here and in other key markets such as Germany. Rivals such as MyTravel have slumped from one financial crisis to another.

Terrorism and the Sars virus also deterred people from travelling during the year but First Choice still reported sales up £65.8m to £2.2bn.

The results went some way to vindicating Mr Long's strategy in recent years to diversify into high-margin, specialist package holidays such as SunSail and Island Cruises.

Mr Long said: "What we have demonstrated is that our mainstream business is big enough to compete with other big tour operators but that our cost base is far more flexible than our rivals to changes in demand.

"At the same time we have built a portfolio of high-growth specialist businesses which match the lifestyles of our customers. During a year people might now want a weekend in Paris, a fortnight in a Spanish villa, perhaps a skiing trip or a trekking holiday as well."

The company announced a 44 per cent increase in earnings per share to 3.6p and a full year dividend of 5p a share, an increase of 11 per cent.