Warning: Trying to access array offset on value of type bool in /bitnami/wordpress/wp-content/themes/the-newspaper/theme-framework/theme-style/function/template-functions.php on line 673


It comes as no surprise to Trends Journal subscribers. We had warned this would happen in our 12 May issue.

The car rental giant, in business since 1918 and owner of the Dollar and Thrifty rental lines, has filed for Chapter 11 bankruptcy after incurring $18.8 billion in debt and having only $1 billion in cash on its balance sheet.
Hertz reported rising revenues in January and February, but since the pandemic arrived the CEO has resigned – its fourth in three years – the company has laid off 20,000 workers, and closed or combined outlets. Hertz’s stock price had dropped 82 percent this year as of 22 May.
Hertz also missed a 27 April debt payment on its fleet of cars and was given a grace period extending until 22 May, the day Hertz sought court protection.
About two-thirds of car rental industry’s revenue comes from airline travelers. Since March, the number of flyers crossing airport check-in points has dropped 94 percent.
Another significant portion of Hertz’s revenue comes from people renting replacements while their cars are repaired after accidents. With so many workers furloughed or working at home, that income stream also has shrunk drastically along with the number of rush-hour fender-benders.
The company said it will use its $1 billion in cash to stay alive while it completes the bankruptcy process.
Hertz, which reported $9.8 billion in revenue in 2019, still lost $58 million last year and $225 million in 2018. It lost $356 million in the first quarter of this year.
The company has been burdened by missteps, including its overpriced acquisition of Dollar and Thrifty in 2012 and a heavy investment in compact cars, which rental customers no longer favor.
Hertz’s chief shareholder is Carl Icahn, a well-known private equity investor in the leveraged-buyout business. Icahn owns 39 percent of Hertz.
Avis, Hertz’s chief competitor, carries far less debt and has reported it has enough cash to last the year.
TREND FORECAST: As we have previously noted, the car rental business relies heavily on airport travel. With passenger travel down some 90 percent and Uber and Lyft draining business from rental car agencies before the coronavirus lockdowns, the profitability of rental cars will remain under pressure… especially as less people travel due to virus concerns, tourism restrictions, and lost income.

Comments are closed.

Skip to content