Britain's biggest package tour operator Airtours announced a heavy fall in third quarter earnings yesterday, but said it was in great shape for the future.

The company has three operations in the Republic. These are Airtours Holidays and Direct Holidays and Panarama, which it acquired in September 1998. The company said pre-tax profit before one-off costs, goodwill and amortisation plunged more than 70 per cent to £6.2 million pounds sterling (€10.36 million) after its takeover of loss-making German rival Frosch Touristik (FTi).

"The big issue for us is what we can make in the fourth quarter," said managing director Mr Tim Byrne. "What we have done is spent a lot of time sorting out our businesses . . .That has cost us a few million pounds this year but at the end of the day we will be in great shape."

Airtours has made a total loss of £55.7 million over the past nine months, but Mr Byrne was adamant the group was on track to meet analysts' full-year pre-tax forecast of £120 million.

The group has been saddled by poor European demand, particularly in Germany. Losses at Fti triggered a profit warning shortly after it was purchased in July, sending Airtours' share price spiralling down 17 per cent.

"Germany has been a problem," Mr Byrne conceded. "But when you add capacity you do increase your profitability for the fourth quarter."

Airtours said it expects its German acquisition, for which it hopes to get European regulatory approval on August 29th, to make a total loss of £80 million this year due to difficult market conditions.

Overall turnover rose nearly 20 per cent to £1.159 billion for the three months ended June 30, bolstered by demand in Britain. Bookings in Britain for this summer are 16 per cent up and winter 2000/01 reservations are currently 4 per cent ahead of the previous year.

The domestic market, which accounts for 50 per cent of the group's business, was the only one to produce a pre-tax profit in the third quarter, leaving a cumulative loss of £5.4 million for the last nine months.

Airtours said re-organisation and a drop in overheads across the Atlantic and the closure of its businesses in France and Belgium would enable it to eliminate losses next year. In Europe, increased brochure prices, poor demand in Scandinavia and low prices and high discounting in Belgium, Holland and France conspired to produce a total loss of £17.9 million for the last three quarters.