Loading ...Hertz, America’s second largest rental car company, saw a loss of half of its market value in the first half of this year due to speculation that increased airfares along with increased fuel costs would damage its earnings.
So far, Hertz hasn’t experienced a drop in earnings, although both the Avis Budget and Dollar Thrifty groups are seeing reduced numbers. Second quarter net income for Hertz is likely to show a 21 percent increased, based on analyst estimates that have been compiled by Bloomberg. The rental car company is also seeing an increase in reservations, including those booked in advance through September, according to the company’s CEO, Mark Frissora.
The gain in profits for Hertz stems from a decision made by management in 2006 to move into the $10 billion off-airport market that it had abandoned more than 30 years previously. Enterprise Rent-A-Car, the largest rental car company in America by sales, has been the major player in this market segment. The off-airport segment comprises accident-replacement vehicles, and business and leisure rentals that are not related to the traditional travel market.
“One of the most common misconceptions is that Hertz is exposed only to cyclical industries,” commented Connor Browne, the managing director of Hertz’s third-largest investor, Thornburg Investment Management Inc. They have a number of growth opportunities in more stable areas.”
Enterprise dominates the off-airport segment, controlling around three-fourths of the market. Hertz has been making inroads into Enterprise’s share of the market by building a series of strip mall locations, almost on a daily basis since 2006.
www.hertz.com
