Record fuel prices hurt car rental firms

The dramatically rising price of fuel-which now stands at over $4.10 per gallon in the United States-is clearly hurting car hire firms, with both Thrifty and Avis Rent A Car experiencing declines in profit and weak second quarter performances. Avis pointed out that the problem is mainly that the fuel surcharge added to the price of air tickets by most carriers has been increased by significant proportions this year, which-along with the economic slowdown-is causing Americans to cancel or rethink their travel plans. Avis now predicts that its total earnings for 2008 will stand at around $350 million, but it is important to keep in mind that this figure represents a pre-tax amount. Yet even this marks a significant decline from 2007 earnings, which reached an impressive $409 million.

Industry analysts believe that Avis and Dollar Thrifty are hardly the only companies in this predicament. Revere Research, for example, concluded that car hire firms collectively lost a stunning 83 percent of their stock value, in a period of little more than a year. Yet both Avis and Thrifty do still have option available to them, in order to improve their performance. These car hire giants are getting ready to cut down on the size of their fleet, which will necessarily mean that individual rentals will become more expensive, due to the laws of supply and demand.

www.avis.com