PARSIPPANY, N.J. – Avis Budget Group confirmed to Business Travel News that it has declined to increase its stake in chauffeured transportation provider Carey International to 80% from 45%. Avis Budget had one year to assume the majority stake following its initial October 2007 investment in Carey.
"Due to the challenging economic environment, we have chosen not to exercise our option," Avis Budget vice president of corporate communications and public affairs John Barrows said in an e-mail to BTN.
Avis Budget officials had described the initial $60 million investment in Carey as a way to diversify its offerings to offer a complete ground transportation solution to the corporate market. "It's another product to put in our bag," Avis Budget CEO Ronald Nelson told BTN in January. "Many of our top customers spend as much on limo as they do on car rental."
Avis Budget also cited the weakening economy as a factor in its third-quarter financial results. The company recorded $1.7 billion in revenue, similar to its 2007 third-quarter revenue levels, but Nelson in a conference call with investors said corporate and leisure demand began to drop in August and has continued to do so since, and he warned of a weak fourth quarter.
"We are facing the perfect storm for our industry," Nelson said. "The decline in enplanements and the downturn in the global economy have and the foreseeable future will significantly impact leisure and commercial demand." Corporate demand declined "even faster than we anticipated," he said.
Despite the weakening demand, Nelson said there were some bright sports for Avis Budget in the corporate market. "Our commercial account growth has been solid," Nelson said. "In the quarter, we won more accounts than we lost, as measured by revenue. In October alone, we signed $15 million of new commercial business. Additionally, our small-business program growth continues to exceed our expectations. In this quarter alone, we enrolled almost 20,000 new accounts in the program. We are pleased with the sales momentum we are seeing across all areas."
Source: Business Travel News