Britain's First Choice Holidays said on Thursday its first-half loss widened to 82.5 million pounds ($162.8 million) as it paid for acquisitions and selling package holidays continued to be a tough job.
First Choice said it expected margins at it core Mainstream package holiday business to continue to suffer as a result of increased taxes on holidaymakers and the higher cost of fuelling its planes.
"In Mainstream Holidays our performance has tracked in line with our expectations in what remains a challenging market," First Choice said.
The firm added that it would raise its interim dividend by 11% to 2.5 pence per share and said that trading in the last six weeks was in line with its expectations.
Earlier this month the European Commission conditionally approved the firm's plans to tie up with Germany's TUI AG.
The two firms have said they plan to create TUI Travel Plc, a London-based tourism giant 51 percent owned by TUI. First Choice shareholders would own 49%.
The deal follows the approval of a travel merger in May, when German-owned Thomas Cook won permission from the Commission to buy British package holiday rival MyTravel.