Weakened corporate travel demand impacts rental car operators

Rental car companies in the US are continued to face a challenging environment in 2009, as business travel deteriorates further and fleet costs rise. Many rental firms are laying off employees, reducing fleet size and beginning to increase prices.

Industry-wide, increases in daily and weekly rates began to appear in the final quarter of 2008.

“We are in the midst of one of the toughest conditions I have faced in my 30-plus years in business,” noted Ronald Nelson, the Avis Budget Group chairman and CEO during a presentation last November. He commented that the future for auto manufacturers “has complicated fleet management and financing,” that a “soft used-car market” has made it difficult to dispose of existing vehicles and that a tight credit environment has made it more difficult to make cost-effective purchases.

For the third quarter of 2008, Avis Budget lost over $1 billion, dragged down by an impairment charge of $1.3 billion given “the significant decline in the company’s equity market value over the last several months, as well as soft economic conditions and financial market disruptions that have increased the cost of capital for many corporations.”

Earnings of $130 million were down from $168 million in the previous year. The Avis Budget CEO explained that the company had realigned its sales teams “to better serve and penetrate” the mid-level market.

Third-quarter net income at Hertz was down significantly for the third quarter from the same quarter in 2007, as “conditions continue to deteriorate,” noted the group’s chairman and CEO, Mark Frissora in comments made last November.

Thanks to www.procurement.travel for the above quotes, for more information on this article please visit their website.

www.avisbudgetgroup.com