Summer bookings are up in spite of the conflict

The company said trading had been particularly difficult since November but in recent weeks bookings had worsened.

"The uncertainty over the conflict in Iraq, together with fears of terrorist attacks within our departure countries, have significantly affected our customer bookings during what is normally... a peak booking period," the travel company said in a trading statement.

And the chief executive, Peter McHugh, told MyTravel's annual shareholder meeting that "current conditions" made it almost impossible to give an outlook for the rest of the year.

But there was a bright spot because summer bookings were 3% higher than last year.

Shares jumped 18% to 13 pence on that news.

MyTravel shares have lost 95% their value in the past year because the company has admitted to accounting errors and issued a series of warnings about profits.

Cutting costs

The company told investors that it was going to court in the next few weeks to claim damages from the European Commission for blocking its planned takeover of First Choice Holidays in 1999.

"The figure we will claim will be substantial but the European Court proceedings are likely to take several years before any judgment is given or damages awarded," MyTravel said.

The company's update came as the US-led war on Iraq was just getting under way.

It is widely expected the war in the Gulf will lead to a deterioration of the world's travel industry, already badly hit by the global economic slowdown following the September 11 attacks.