Summer bookings improved, MyTravel said

The firm, which is struggling to manage massive debts, did not give details of the planned restructuring.

However, it said that such a move would lead to a "significant dilution for existing holders of equity and bonds".

MyTravel also said that summer business had improved after a difficult start, and that it was making "good progress" in turning round the company.

Holiday money

MyTravel was hit harder than many firms by the downturn in travel in recent years as it had invested heavily in expanding capacity.

This meant that the firm - which was formerly known as Airtours - was left with high costs and many unsold holidays when the downturn came.

We are making good progress towards achieving the turnaround Peter McHugh, MyTravel chief executive See MyTravel's share price

The firm has launched a major cost-cutting programme, which has seen it shed thousands of jobs and sell several businesses, including its cruise ship and car hire units and its German division.

MyTravel warned earlier this year that a financial restructuring could hit the value of shareholders' stakes in the company.

In a trading update, the firm said it would be meeting with banks on Thursday to propose a debt-for-equity swap.

The company did not specify how much equity the banks would be offered and added the "form and terms of any restructuring remain subject to negotiation".

Clearer skies

Despite the firm's financial woes, MyTravel said that summer bookings had picked up despite a slow start.

"We now believe the operating result for the 12 months to 30 September 2004 will approach break-even," said chief executive Peter McHugh.

"We are making good progress towards achieving the turnaround and we are targeting a further trading improvement in 2004/05."

While its UK division is set to record a loss for the year to September, MyTravel said its performance would be "significantly" better than last year.

"Both Northern Europe and North America are having excellent summers and will be profitable for the current year," Mr McHugh said.

"For the Winter season, bookings are encouraging for all divisions.".