Rivals ready to pounce if MyTravel goes under

Rival holiday companies are standing by to pounce on any spare hotel capacity in holiday hotspots across Europe in the event that Britain's largest tour operator, MyTravel, is pushed into bankruptcy by a slew of accounting issues and trading problems.

The future of MyTravel, known as Airtours until earlier this year, was thrown into further doubt yesterday after investors marked its share price down another 37 per cent to 18p. This was in spite of repeated assurances from the company, valued at just £89m, that it was not in danger of breaching its banking covenants.

James Hollins, an analyst at WestLB Panmure, said: "MyTravel's shares are on 1.5 times next year's earnings so people clearly think they are going to go bust."

TUI, the German holiday giant that owns the UK's Thomson Holidays, is understood to be among the tour operators that are preparing to move should MyTravel's financial position worsen. In addition to the 15 million customers MyTravel carried last year, the group's key attractions include the long-standing agreements it has with hoteliers in holiday Meccas such as the Balearics and Spain. Its parcel of hotels in Majorca, where prospects for new hotel construction are limited, is particularly attractive.

Any move to capitalise on MyTravel's distress would be seen as deeply ironic, given that it was the collapse of former rival International Leisure Group, which owned the then number two holiday brand Intasun, in 1991 that catapulted Airtours into the major league of package holiday companies. Never one to miss an opportunity, David Crossland, Airtours' founder and chairman, moved quickly, buying ILG's defunct airline and mopping up thousands of attractive hotel contracts, and his company trebled in size overnight.

"It's fair to say everybody would be making various contingency plans," said a source close to one tour operator. "If any company went bust we would look at where they have contracts with hoteliers, where are the hotels, what are they like, are they on the beachfront?"

While the nature of the relationship that tour operators have with hoteliers has changed – these days far more contracts are guaranteed for a number of years, which means holiday companies are obliged to pay an agreed rate even if cannot sell its packages – that will not help hotel owners if MyTravel does become insolvent.

Richard Carrick, who heads up MyTravel's UK leisure arm, said there was "no indication whatsoever" that the company would struggle to pay any hoteliers with guaranteed contracts. "We have got contractors in resorts reassuring hoteliers," he added. "There is no suggestion of any default on payments."

Travel industry sources also said they were moving fast to be able to scoop up any customers who might have wanted to book with MyTravel but who were put off by Thursday's revelation that its financial results for 2002 faced an accounting hole of £50m.

A spokesperson for First Choice – the smallest of the UK's Big Four but the favourite to snap up MyTravel – said: "Our model would have the flexibility that if it wanted to increase capacity quickly then it could."