Increase in rental days gives U.S. car rental firms boost in Q2

By Danny King

U.S. car rental companies boosted second-quarter profits as an uptick in the number of days U.S. customers rented vehicles more than offset a decline in daily rental rates.

Hertz Global Holdings benefited particularly from the expansion of its off-airport locations.

Avis Budget also gained from last year's acquisition of Avis Europe, while Dollar Thrifty widened its bottom line in part because of better pricing on the cars it sells back into the used-vehicle market.

Hertz said its Q2 net income jumped 69%, to $92.9 million. Global car-rental revenue rose 9.9%, with a 10% jump in U.S. transaction days more than offsetting the effects of flat transaction days overseas. Revenue rose 7.4%, to $2.23 billion.

Revenue per transaction day fell 3% both in the U.S. and overseas. Hertz said its growing percentage of off-airport transactions reduced per-day rental averages because such rentals tend to be for longer periods and therefore garner lower per-day rates.

Avis Budget's net income surged 52%, to $79 million, while revenue jumped 32%, to $1.87 billion, primarily on the company's $1 billion acquisition of Avis Europe in October.

Factoring out the Avis Europe acquisition, Avis Budget's revenue increased 3%, as a 5% increase in rental days more than offset the effects of a 3% drop in average daily rate.

Meanwhile, Dollar Thrifty said last week that its Q2 net income increased 16%, to $49.4 million, largely because strong prices for vehicles it sold back into the used-car market kept depreciation costs down.

Specifically, Dollar Thrifty's depreciation expenses fell to 15% of revenue, from 17% a year earlier. Overall, revenue was little-changed at $395.4 million.

Dollar-Thrifty spanks Hertz

Both Dollar Thrifty and Hertz used their earnings calls to address ongoing buzz about their unsuccessful merger talks last year.

Dollar Thrifty CEO Scott Thompson appeared to reprimand Hertz, the company's persistent suitor, for not resolving issues with the Federal Trade Commission (FTC) stemming from its ownership of Advantage Car Rental, which competes directly against Dollar and Thrifty and would thus raise antitrust concerns.

"Neither Hertz nor anyone else has made a current offer to purchase the company, yet there's a persistent stream of reports regarding commitments made to the FTC by Hertz to carve up our company," Thompson said. "After three years, it's either time for a compelling offer to be made or for this process to come to an end."

Hertz first offered to buy Dollar Thrifty in April 2010 and subsequently engaged in a bidding war with Avis Budget. The latter bowed out of the process last October to focus on its pending acquisition of Avis Europe. Later that month, Dollar Thrifty said it would remain a standalone entity, while Hertz officially withdrew its offer, which had reached a high of $2.1 billion in May 2011.

"We continue to believe that a merger is in the best interest for both companies," Hertz CEO Mark Frissora said during a July 31 call with analysts.

Follow Danny King on Twitter @dktravelweekly.

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