|September 21, 2001|
Avis Europe Investor Meetings -- Implications Of US Terrorist Attacks
|Avis Europe has a series of meetings arranged with analysts, investors and journalists over the coming weeks, following the announcement of interim results on 6th September. In light of the events in the USA on 11th September the company will be providing an update on the market dynamics and most recent trends in its business.|
Avis volumes have historically grown circa three times prevailing GDP and ahead of airline passenger growth. Approximately half of Avis's volume is transacted through airports with the remainder through
city, rail or resort locations. The company has the ability to flex fleet and staffing levels to volume changes, as illustrated by the company's performance following the sudden downturn in rental activity during the Gulf War period.
The rental industry has faced significant fleet cost increases over the past three years. Weaker retail demand for cars and the focus on operating efficiencies is expected to substantially reduce the rate of increase in fleet costs going forward.
There has been some decline in demand post 11th September particularly in US inbound and the corporate sector as companies introduce travel restrictions. As indicated in our Interims announcement prices continue to be above prior year.
Long haul volumes (approximately 15% of annual volumes) are currently running at 30-35% down versus prior year. The three months until 11th September were 15% down primarily as a result of the
slowing US economy. Corporate volumes (approximately 27% of annual volumes) are currently running approximately 10% down versus prior year. The three months prior to 11th September were at similar levels to prior year.
The balance of the business (58% of annual volume) which includes European and Domestic Leisure and Replacement, is broadly at levels similar to prior year, with some signs of increased demand from customers seeking alternatives to air travel.
Contingency Plans and effect on Margins
Contingency plans have been activated across the Group to reduce costs and develop revenue segments unaffected by current events. About 60% of the company's cost base is variable with a time lag of about 2-3 months to adjust fleet and staffing to the required utilisation and productivity levels. Immediate actions have been taken to reduce fleet, freeze recruitment and capital expenditure and limit travel spend. These contingency actions will create a lower cost base for 2002.
Avis Europe's strategy at this stage is to contain expenditure without disrupting overall plans for development of the business in 2002 and beyond.