Fleet News

Switching to franchising reduces Budget's losses

Switching its corporate operations to franchises has reduced daily rental giant Budget's operating loss for the third quarter of the year.

Its international operations improved by $16.8 million to a third quarter operating loss of $550,000 - and company executives say they are now looking for rental 'pricing to improve'.

The company said: 'The significant improvement in Europe is due to the company's success in transitioning its corporate operations to a franchised model.'

Budget added that during the quarter it operated a fleet in Europe of 10,400 vehicles, down from 31,000 vehicles during the previous year.

It said its European corporately-owned locations totalled 71 for the quarter, down from 310 locations at the end of 2000.

'Franchised locations in Europe now total 481, further supporting Budget's international brand presence,' the company added.

Budget chairman and chief executive officer Sandy Miller said: 'We have significantly improved Europe's financial performance, reduced the risks associated with Europe and have increased our international royalty fee stream.'

Miller added: 'The primary operating issue we face is pricing in the car rental industry. As industry fleet levels align with demand, we look for pricing to improve.'

Commenting on the effects to the business of the September 11 terrorist attacks on the US, which has led to a downturn in business for many companies, Miller said: 'Prior to September 11, we were experiencing a strong third quarter considering the economic environment.

'We sustained much of this momentum to achieve our targeted earnings for the third quarter. Vehicle utilisation was up and we had nearly completed the seasonal reduction of our fleet.

'We moved quickly to further adjust fleet and variable staffing levels to respond to the aftermath of the attacks. Our strategic business model, which generates half of our revenue base from non-airport operations, makes us less vulnerable to the slowdown in airport volume. Our local car rental volume is trending up 6% to 7%,' Miller said.

Budget president and chief operating officer Mark Sotir said: 'With nearly 70% of operating costs in vehicles and labour, our proven ability to rapidly adjust fleet and keep staffing levels in line with demand provides significant leverage to maintain operating margins. I believe that due to our speed, agility and focus on asset utilisation, we managed through the events of the quarter better than others.' (December 2001)

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