Rental-car rivals struggle after attacks
Tuesday, September 25, 2001
ST. LOUIS -- As its rivals struggle in the wake of the terrorist attacks, Enterprise Rent-A-Car says it has enjoyed a smoother ride with what has made it the segment's domestic leader over the years -- a focus on business away from U.S. airports.
Drawing just 5 percent of its business from the domestic airport market, St. Louis-based Enterprise said Monday it has weathered the ripple effect of the Sept. 11 terrorist strikes that have curtailed U.S. air travel.
On Monday, the Florida-based owner of the Alamo and National car rental chains said the suicide jet attacks on New York and Washington will crimp its earnings the rest of the year. The Oklahoma-based company behind Dollar and Thrifty rental cars issued its own earnings warning last week.
All the while, Enterprise executive Rob Hibbard said "our overall business has been fine," thanks largely to the privately held company's focus on customers whose vehicles were in the shop -- and a smaller reliance on airport business it has tried to build only in recent years.
Hibbard, vice president of rental development, said the company mourns the tragedy and the suffering created by the attacks. "From a business model, it's nice to validate that our business can sustain this type of event," he said.
Most of Enterprise's $5.6 billion in revenue last year came from non-airport operations, making the 44-year-old company a bit player in the airport market specializing in rental cars to business travelers.
Enterprise has grown rapidly since the mid-1980s, when insurance companies began providing clients with rental cars while their vehicles were being repaired. Only in recent years has Enterprise made a push for a bigger piece of the airport market.
Five years ago, Enterprise had a location at just one airport; today, Hibbard said it rents at 50 of the nation's top 100 airports, with an additional 48 car-rental sites on the fringes of others.
Car rentals boomed in the days after the attacks, with many rental vehicles sold out in larger cities and some agencies halting one-way rentals. Some states launched investigations after complaints of car-rental price gouging, including a Texas customer's report of being charged $460 a day.
But many car rental companies have suffered with the airline industry as the terrorist attacks sent shivers through the flying public, with postponed travel plans by consumers prompting many carriers to slash schedules.
Still, Hibbard said Enterprise has seen as much as a 25 percent uptick in use of its rental vehicles for business travel, often for trips of less than 300 miles by people who ordinarily might have flown.
On Monday, ANC Rental Corp. of Fort Lauderdale, Fla., owner of the Alamo and National, said the attacks will "significantly" impact earnings for the rest of the year. The firm was considering reducing its fleet by 25 to 35 percent and other "aggressive" cost-cutting, reviewing liquidity options with creditors and considering seeking federal aid.
ANC, which last year had revenues of about $3.5 billion, said 90 percent of its car rental business comes from airline passengers.
Last week, Dollar Thrifty Automotive Group Inc. of Tulsa, Okla., warned that its third-quarter earnings would miss Wall Street expectations, given slowed U.S. air travel. Dollar Thrifty said it will pare its fleet size.
Credit Suisse First Boston analyst Henry Diamond said the struggles of many car-rental companies could linger, certainly if the airline industry "downturn extends into next year, which I think is the general expectation."
But car-rental companies have a hedge in their ability to quickly cut costs by trimming their fleets, putting them "in general much better position than airlines," Diamond said.