Is the sun setting on MyTravel?

Tour operator MyTravel has just unveiled a far bigger loss than many expected. BBC News Online explains the background to the news, and looks at what might happen next.

How did they get into this mess in the first place?

It has, famously, been a tough time for travel firms.

September 11, the Sars virus, the soaring cost of aircraft fuel - travel firms have bags of reasons for gloom.

But MyTravel, formerly known as Airtours, seems to be uniquely unfortunate: while its rivals are starting to heal themselves, its results have just got worse and worse.

Part of the reason is a failure to adapt to the new realities of the travel business - in particular the greater freedom of choice demanded by adventurous travellers, and the attractions of constructing holidays through the internet.

There also seems to have been some serious bungling behind the scenes, however.

MyTravel was hit last year by a string of profit warnings and a mysterious black hole in its accounts; this year, it has admitted to missing out on a boom in summer holidays.

Its once-legendary ability to read the mood of the market seems to have disappeared.

I've booked a holiday with MyTravel. Should I be worried?

Not at all.

Like most large holiday operators, MyTravel's packages are covered by a cast-iron bond: as long as you have booked and paid, you will either get all your money back, or your holiday in every last particular.

If MyTravel were to go belly-up while you were on holiday, the worst that could happen is that you might have a few forms to fill in.

There are a few caveats for its budget airline, MyTravel Lite, however.

Its flights are covered by no bond, and so there is no guarantee of compensation or an alternative service if you're stranded.

But if you booked the flights with a credit card, or through a reputable tour operator, then even here you will be due for some sort of redress.

What's likely to happen to MyTravel?

If you believe the market, it's not going to go bust.

The company's shares jumped by more than one-quarter after the heavy loss was announced.

This still values the company at a puny �63m, a tiny sum compared with its towering losses - a fact that has sparked talk about its possible removal from the stock market.

According to one theory, the company's bankers may take it private, injecting fresh capital and shaking up management, before releasing it into the wild as a smaller, more solvent beast.

Others insist that MyTravel's immediate future is reasonably secure: now that all the bad news could be out of the way, the company could be back on the upward track.

Earlier this month, MyTravel's UK chief executive resigned, in what some hope may signal a turnaround.

But investors may be hoping to see a bit more management blood spilled before they feel completely comfortable.

And is the whole package-holiday business doomed?

Not necessarily.

The received wisdom is that packages simply cannot compete with the cheapness and choice available online.

Today's consumer, we are told, is no longer happy to be spoon-fed a pre-paid lump of a holiday, and instead prefers the self-service approach, picking a likely flight here, a pretty hotel there.

But don't count the traditional operators out just yet.

First Choice, a firm which until recently was a carbon copy of MyTravel, has radically adapted its business model, moving away from mass-market offerings towards a more individual a-la-carte approached.

In the process, it has remained firmly in profit.

The old style of package holidays may certainly be on the wane. But clever package companies should be able to combine their brand name and marketing reach with the best tactics of the freewheeling online marketplace.