Public RACs: 2009 Report Cards

The numbers are in — and while 2009 was a bumpy ride, fourth quarter and full year earnings reports for the public majors show some positive trends for 2010.

Again, revenues fell in the fourth quarter and full year for Hertz Global Holdings (HTZ), Avis Budget Group (CAR) and Dollar Thrifty Automotive Group (DTG). However, cost-cutting measures and a strong used-car market helped Dollar Thrifty post a quarterly profit, while Hertz and Avis Budget narrowed losses.

In earnings calls, all three companies were cautiously optimistic about demand, residual values and fleet operating costs.

2009 Q4 and Full Year Earnings

For the fourth quarter, Hertz reported a net loss of $30.9 million, compared with a loss of $1.21 billion a year ago. Revenue for the quarter fell about 3 percent to $1.74 billion.

Worldwide revenue for the full year 2009 was $7.1 billion, a decrease of 16.7 percent over the prior year. Adjusted net income was $116.6 million, a 14.1 percent decrease from 2008.

Avis Budget reported revenue of $1.2 billion for the quarter and a net loss of $49 million, compared with a loss of $121 million a year ago. Revenue fell 8 percent to $1.16 billion.

For the full year, Avis Budget recorded $5.13 billion in revenue, compared with $5.98 billion in 2008. Avis Budget’s net loss for 2009 was $47 million, compared with a loss of $1.12 billion for the year previous.

For the fourth quarter, Dollar Thrifty’s net income was $11.5 million, compared with a net loss of $72.2 million a year ago. Total revenue fell 3 percent to $345.3 million.

For the full year, Dollar Thrifty reported revenue of $1.55 billion, compared with $1.70 billion in revenue for 2008. Net income was $45 million in 2009 compared with a loss of $347 million in 2008.

2009 Was a Whole Lot Better

As 2008 was one of the toughest years in car rental — driven by unprecedented macroeconomic forces — 2009 fared a lot better comparatively. It was a year characterized by cost cutting, transaction profitability and a new fleet discipline.

Fleet costs declined again in 2009 over 2008, a far cry from the 15 percent year-over-year spike in costs fleet experienced before the bad economy.

The industry did more with less: The 1.1 million vehicles purchased by the car rental industry last year were half the number of cars purchased in 2006.

RACs continued to vary fleet mix further away from the domestics. Share of the Detroit 3 dropped from 73.3 percent in 2007 to 60.5 percent through 2009. Chrysler experienced the biggest drop in market share, from 25.5 percent to 15.1 percent in those two years. Dollar Thrifty eliminated its 75 percent Chrysler purchase requirement in 2009 while entering a long-term supply agreement with Ford.

The shift to risk vehicles continued. Dollar Thrifty reduced its program vehicles from 35 percent to 10 percent last year. At the end of 2009, Hertz’s fleet was 67 percent risk. However, Avis Budget said it’s comfortable with maintaining a 50 percent mix of risk and program units for resale flexibility.

If 2008 was the year rental cars were making friends with Rip Van Winkle, RACs have been rethinking high-mileage units.

In 2009 Dollar Thrifty extended hold periods to lower fleet costs. However, Avis Budget said its fleet now has an average age of less than seven months, with 95 percent of its vehicles having less than 30,000 miles.

By the end of the year the average age of Hertz’s U.S. fleet was 8.5 months compared with 9.7 months the year previous. U.S. risk cars at the time of sale currently average 21 months, the company said.

The industry is embracing remarketing technology and new channels to sell cars.

Hertz has reduced its dependence on traditional auctions in favor of dealer-direct sales and online auctions. The company is also piloting a direct-to-consumer Internet sales program called Rent-to-Buy, which is now licensed in 13 states.

CONTINUED:  Public RACs: 2009 Report Cards
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