After a 9% revenue boost during January and February continued accelerating the vehicle rental company's profits into the new year, Avis Budget Group, Inc. (CAR -4.22%) announced today that the coronavirus may cause it to slam on the brakes in March and into April.
Revenue started to stall in March as the COVID-19 pandemic took hold in the United States, prompting travel restrictions. Now, Avis reports car rental reservations are down about 60% for April onward, and the company suspects additional contraction is likely.
Ending 2019 with a record-breaking fourth quarter of profits, Avis began the new year on a positive note. Global demand for its service was apparently flourishing, with 1% higher revenue per day and 8% more rental days as people rented cars more often and for longer periods. However, what looked like solid year-over-year gains compared to the first quarter of 2019 stumbled in March as the novel coronavirus caused customers to sharply curtail travel.
Avis is working to reduce its costs by $400 million through a series of emergency actions. These include pay reductions for executives and senior employees. The company is also freezing hiring and laying off part of its workforce, but has not yet publicly revealed how many employees will lose their jobs. The company is also "aggressively" selling off vehicles and expects to gain cash amounting to $1.1 billion by "accessing" the "surplus equity" in their fleet.
Avis withdrew its 2020 guidance, issued at the time of its Q4 2019 earnings call, but says that its available liquidity should allow it to continue operating through the rest of the year at a minimum.