* Airport rentals hurt by U.S. government spending cuts
* Company says car fleet under-utilized
* Cuts earnings/share forecast to $1.68-$1.78 from
* Hertz shares fall 15 pct; Avis Budget shares drop 7 pct
By Bijoy Anandoth Koyitty
Sept 26 Hertz Global Holdings Inc
lowered its full-year earnings forecast as cuts in government
spending hurt U.S. airport rentals, sending its shares down 15
percent to a six-month low.
Government austerity and low consumer confidence have
reduced U.S. airline and hotel bookings this year, cutting into
one of the biggest sources of revenue for Hertz and its largest
publicly traded competitor, Avis Budget Group Inc.
Shares in Avis fell as much as 7 percent on Thursday.
The U.S. car rental industry is tied inexorably to domestic
travel, which has been hit this year by budget cuts that have
also reined in travel spending in the defense industry and other
key government suppliers.
"We are revising full-year 2013 guidance primarily because
of weaker-than-anticipated volume ... in the U.S. airport car
rental market, our largest business," Hertz Chief Executive Mark
Frissora said in a statement.
Airport rentals contribute about half of revenue at Hertz,
the largest U.S. car rental company after privately owned
Enterprise Holdings. Together with Avis, the trio controls about
95 percent of the country's car rental market.
In a move to cut dependence on commercial airport rentals,
Hertz fought a long battle with Avis to acquire Dollar Thrifty,
which serves the leisure car rental market.
Wells Fargo Securities analyst Richard Kwas wrote in a note
that Hertz had been unable to integrate its fleet from the
Dollar Thrifty acquisition "as smoothly as expected in the first
Frissora, who is also chairman of Hertz, said weaker airport
rental volumes had resulted in the company's fleet being
under-utilized. The used car market was unable to absorb its
excess vehicles at current market prices, he said.
"Fortunately, stronger pricing in the U.S. airport car
rental market is helping to partially offset softer volume," he
said, adding that the European car rental business had overcome
a protracted recession.
Hertz said it expected full-year adjusted earnings of
$1.68-$1.78 per share, down from its previous forecast of
The Park Ridge, New Jersey-based company cut its revenue
forecast to $10.80 billion to $10.90 billion from $10.85 billion
to $10.95 billion.
The company's shares were down 15 percent at $21.91 in
afternoon trading on the New York Stock Exchange. Avis Budget's
shares were down 6 percent at $28.27 on the Nasdaq.