Avis Budget Group
Avis Budget is proving no exception. Despite a profitable second quarter, slightly higher expectations for the balance of the year, and a plan to escape ultra-competitive airport rentals that are also served by archrivals Hertz
At first glance, management expectations for 4%-6% rental day volume growth for all of 2007 appear respectable. However, it expects fleet costs to rise 6%-7%, outstripping the benefits of other positive time and mileage revenue trends. Worse yet, favorable repurchase agreements that Avis Budget has in place with the Big 3 automotive makers of General Motors
For 2007, about 20% of Avis Budget's fleet will not be subject to agreements where the Big 3 guarantee to repurchase vehicles sold to rental agencies at set prices. The proportion is expected to rise to 50% by 2008, leaving the company much more exposed to the volatile pricing and depreciation movements of domestically manufactured cars and trucks.
Management plans on fighting industry headwinds by growing its "off-airport network expansion, and captur(ing) incremental profit opportunities." It also intends to focus on lowering damage and maintenance costs as well as boost employee productivity -- both of which it said it achieved so far this year.
Aug. 26 marks the anniversary of Cendant's split into four separate companies. The original segment became Avis Budget, with the Realogy real estate unit, Travelport travel business, and Wyndham
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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.