Avis
Budget Group this year began applying a new strategy to maintain commercial
accounts only when they are profitable, and forgoing those that are not. "This
is having a positive effect," said CEO Ron Nelson during a Thursday conference
call with analysts. "Year to date, we renewed more than 1,000 commercial
contracts and have been able to hold or increase rate nearly 60 percent of the
time, and the average rate on renewals has improved as the year has progressed.
"We
have also held to the discipline of walking away from business on those
occasions when we didn't think it was possible to make money at the rates being
demanded," Nelson continued. "If we can't get rates that we think are
remunerative when commercial account renewals come up, we're not going to lose
money simply to post volumes."
He
added that the initiative "will take several quarters to play out fully."
For
the Avis brand, third-quarter rental volume increased 2.5 percent year over
year, "driven primarily by contracted commercial business, which increased
8 percent," Nelson said. He explained that the "strong year" for
the commercial business at Avis "largely represents some new accounts,"
including a "big" unnamed account that started at the beginning of
2013 and "had a point or so impact."
Overall
across all brands, "commercial volume was up 3 percent in the quarter
despite a negative two-point impact from reduced government demand," said CFO David Wyshner, referring to the U.S. federal government
sequester spending cuts and partial shutdown.
Avis
Budget's North America on-airport volume increased 3 percent during the quarter,
"more than double the growth rate we experienced in the first half of the
year" despite reduced government business, Nelson said.
Total
North America pricing increased for a third consecutive quarter, driven by
three general price hikes, though commercial pricing overall still was down 1
percent year over year.
In
terms of overall financial performance, "the third quarter marked
our highest-ever quarterly earnings," Wyshner said, "principally
as a result of higher volumes and improved year-over-year pricing in North America,
record results in Europe and strong cost controls, as well as the acquisition
of Zipcar and Payless." Third-quarter adjusted earnings
before interest, taxes, depreciation and amortization grew 2 percent year over
year to an "all-time high of $383 million."