Hertz navigating bankruptcy, but rental car industry expecting growth

The goliath car rental corporation Hertz Global Holdings continues to battle their way through bankruptcy proceedings post-COVID. On May 22, 2020, Hertz filed for bankruptcy protection in the throes of the pandemic with roughly $19 billion in debt and almost 700,000 rental vehicles sitting idle. In Q2 2020 alone, a net loss of $847 million exceeded their total revenue for the quarter at just $832 million.

In their restructuring efforts, Hertz is considering the sale of Donlen Corporation, their leasing business acquired in 2011. Letting go of the leasing entity could provide $1 billion or more to settle outstanding debts. That follows a mass sell-off of more than 182,000 vehicles from their fleet between June and December 2020, agreed to in an interim settlement with their creditors.

Hertz is not yet out of the woods, and has been criticized recently for attempting to sell $500 million in stock before being shut down by the SEC. Then, they sought approval for millions of dollars in bonuses to be paid to executives should they successfully navigate the company out of bankruptcy.

Not Alone in Financial Woes

Unfortunately, Hertz Global is not the only rental car company that’s feeling the heat as COVID-19 continues to impact the nation. The travel industry, a significant factor for rental car business. Corporate travel, which makes up 55 to 75% of the revenue for airlines despite being just 10% of the passengers, declined by roughly 70% in April 2020 over the previous year. People traveling for business account for a serious portion of car rentals, especially at airports where rates typically are higher.

In H1 2020, SIXT realized a loss of approximately $145 million US but is positioned better financially than Hertz. Avis also operated at a loss in the second quarter but managed those losses to exceed expectations on Wall Street.

For rental companies, much of the risk remains in their inventory. Of all rental agencies, 48% purchase all of their inventory outright rather than participating in repurchase programs from manufacturers, according to 2020 Bobit Business Media data.

Related: How to Run a Successful Dealership Rental Program

Steady Growth Expected in Coming Years

Although the sting is still fresh from the pandemic, rental car companies can look forward to the industry being revitalized in the coming years. For companies looking to access capital, used car market demand remains extremely high and top prices can be realized by liquidating part of the fleet.

Tech research and advisory company Technavio forecasts that between 2020 and 2024, the rental car industry will see CAGR of 17%. As the travel industry slowly resumes its operations, rental agencies will be able to return to business practices that put them in the black. However, that may not look like it has in recent years.

Enterprise Car Rental began streamlining customer interactions with LaunchPad mobile tablets, allowing staff to complete transactions off-site and with greater ease. Advances like this can alleviate the stress of human capital expenses while offering better service.

Dealerships with satellite rental agencies on site may not notice much difference, but for those who use rental companies for loaners, tech advances could improve the customer experience greatly when securing a loaner. It will be months or years until the rental car industry returns to a place of stability, though.

Related: Why Your Dealership Might Consider Working with a Car Rental Company

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