LEADING package tour operators trying to sell short-haul packages to European sun-spots this summer fear that their peak season prices are likely to be undercut by the decision of no frills' airlines to dump tens of thousands of seats.

Leading trade journal Travel Trade Gazette (TTG) says the Ryanair decision to offer three million seats for £20 return in July, August and September will torpedo tour firms' hopes of getting better prices when school holidays begin.

It cites the case of Libra Holidays, a specialist in packages to Greece and Cyprus, which now tries to sell only 245,000 summer packages a year, barely half the total of a few years ago. Libra reportedly wants to quit the UK short-haul holiday market altogether, to focus on its more lucrative hotel and property development businesses.

The biggest operator in the market, Thomson-TUI, is beefing up its website, adding more product from bed banks and airlines, to fight off the budget airlines.

Thomson's Online Booking Report for 2007 says Thomson hopes to have 100,000 hotels on its site by the end of the year, within a plan to offer 500 airlines and 200,000 properties before long.

Its budget airline, Thomsonfly, has announced flights from Luton/ Manchester to Tel Aviv as part of its strategy to reduce its reliance on the short-haul summer market.

TTG editor Lucy Huxley says: "If Ryanair is prepared to blow £45million on a £20 seat sale to stimulate a tough market, there are a fair few traditional operators who haven't a hope in hell of competing.

"In fact, it will probably send a few over the edge."

However, Platon Loizou, the boss of Turkey specialist Jewel in the Crown Holidays, says that smaller firms like his which are nimble on their feet are mounting a fightback.

"Many budget airline seats, if you want to leave in the next few days, are not cheap at all," he says. "My son missed his £35 flight to Glasgow, and next day it cost him £179.

"We are selling very well some seven night hotel breaks in Turkey in early July from under £200, and we have fewer empty seats than last year.

"Some of the bigger operators will struggle in this year's market because they have heavy overheads and aircraft to keep busy. Smaller operators with low overheads and good marketing will adapt and come through.

"Remember, lots of budget airlines fly to Timbuktu north, where not many people want a holiday anyway." INFORMATION: Jewel in the Crown (01293 533 338 and www.jewelholidays.com); Libra (0871 226 7825 and www.libraholidays.co.uk).