A baggage-handling company which announced it was axing up to 250 jobs at Gatwick has lost a major contract to a rival firm.

Aviance has lost the Delta Airlines contract for ground handling of its passengers and baggage to Servisair.

The contract operates from January 21 for three years.

This gives Servisair its first toehold in the south terminal after operating solely from the north terminal.

Delta station manager at Gatwick John Walters said: "Servisair was chosen because it produced the most competitive package."

Delta, which has its headquarters in Atlanta, USA, owned shares in Aviance but sold them in 1998.

The airline used the company's handling services for 22 years before switching to Servisair.

A Servisair spokesman said: "We are obviously pleased to get business at a key airport with an airline with a fine reputation."

Aviance operations director Jack Owen said: "To lose the contract at this time is unfortunate.

"However, contracts do move around within the aviation industry and we recognise that Servisair wants to be in the north terminal."

He said Aviance had been working closely with the GMB union to minimise redundancies by offering other jobs at Heathrow and within its parent company, Go Ahead, which owns trains and bus companies.