The war is affecting international travel

The struggling company managed to cut its full year losses in half - helped by the transfer of 400 IT and administration jobs to India.

But the situation in Iraq meant people were putting off making travel bookings, the online travel company said.

It said it was pinning its hopes on a release of "pent-up demand" once the conflict was over.

Takeover boosts sales

"The commencement of hostilities against Iraq will inevitably have an impact on sales and profitability for the remaining days of the first quarter," Ebookers said in a statement.

The firm, which sells package holidays, flights and car rentals over the internet in 11 European countries, racked up losses of to �12.3m.

But it pledged to return to profit for 2003.

Its recent �55m takeover of high street rival Travelbag should help boost results.

Travelbag has annual sales of �200m through its three non-package brands - Travelbag, Bridge the World and Travelbag Adventures - and mainly sells trips to Australia and New Zealand while Ebookers is strong on travel to the USA and Europe.

Not counting the Travelbag takeover, Ebookers sales last year increased by 52% to �273m.

But in spite of more sales, its annual operating costs dropped by �2m to �44.6m after the opening of a 400-employee back office in India.