Rumour mill failed to predict `sensation'

The Scott Trust's double hit on editors Peter Preston and John Fenby has left staff stunned, writes Maggie Brown There has been a buzz all week that Jonathan Fenby, the editor of The Observer since June 1993 was about to be replaced. After a series of facelifts the paper's sales were still in the doldrums.

But at 5.30 last night the Scott Trust, which controls The Guardian and its new acquisition The Observer, stunned everyone. The papers were looking not for one new editor but for two.

Peter Preston, The Guardian's editor for the last 19 years, is to move upstairs. At the age of 56 he is to become editorial director of both papers.

The Guardian appears to be in a strong position. It has held its sales above what it sees as a crucial benchmark of 400,000 copies per day despite a vicious price war which has seen its competitors, The Times, The Telegraph and The Independent, slash th e ir cover price.

But these conditions make the losses of The Observer, Britain's oldest newspaper, even more critical.

Since the Guardian Media Group bought The Observer from Lonrho 19 months ago it has made big cost savings at the Sunday, moved it to The Guardian's building and attempted to restore its somewhat tarnished reputation. It bought the paper after an approachfrom Newspaper Publishing, owners of The Independent and its Sunday sister, who wished to merge the two Sunday titles. But these moves have not been sufficient. The Observer, as Harry Roche, chairman of the Guardian Media Group confirmed this week, remains a serious problem.

Any new editor of The Observer will be expected to integrate it into The Guardian's operation: executives point out, for instance, that The Observer could make more use of its costly foreign correspondents.

Candidates for the editorship to replace what has been a less than successful reign by Mr Fenby - insiders say he never naturally grasped the agenda of a Sunday paper - include his deputy John Price who, like Mr Fenby, is a former home editor of The Independent. An outside contender may be Stewart Steven, the Liberal-inclining editor of the Evening Standard.

But what of Peter Preston? It is beyond doubt that he has been shaken, if not wounded, by the two incidents which had The Guardian generating news headlines of its own last autumn. Its campaign against government sleaze boomeranged with the "cod fax" he sent to the Paris Ritz which used House of Commons notepaper to gain a copy of the hotel bill.

The second revelation was that the The Guardian's long standing executive, Richard Gott, had received payment from the KGB. Mr Gott resigned. Mr Preston has still to appear before the House of Commons privileges committee.

But Guardian executives were swift to stress that Mr Preston was most definitely remaining as a power in the land.Beneath Mr Preston is a highly capable deputy editor, Alan Rusbridger. His credits include launching G2 two years ago, the tabloid section which has done much to protect The Guardian sales by attracting young readers. Liz Forgan, a former women's editor of The Guardian and currently managing director of BBC Radio may also be in the frame.

Mr Roche sees no sign of the price war abating this year, even though newsprint prices are escalating and may well continue to do so for another 18 months.