Limo, Sedan Cos. Take A Hit

The ground transportation industry is taking a huge hit from the Sept. 11 disaster, with booking of chauffeured sedans and limousines off 85 percent since the hijackings, according to Scott Solombrino, president and CEO of Dav El Chauffeured Transportation Network in Chelsea, Mass., and co-chairman of the legislative committee for the National Limousine Association.

Industrywide, "we've calculated a $1.7 billion loss of gross revenues between now and the end of the year." Solombrino and other industry execs are lobbying Congress to include relief for their industry in the proposed airline bail-out bill. "We could lose 60 percent of operators in the country if we don't get help from the federal government," he said.

Chauffeured car operators particularly are vulnerable to the drastic fall-off in bookings because "we're a marginally profitable business as it is," noted David Seelinger, president of Empire International, based in Norwood, N.J. Like the airlines, "we have a lot of fixed costs and are heavily leveraged."

Based on a quick survey of 13,000 U.S.-chauffeured car firms, the NLA estimated that business will be off 70 percent through the end of the year. "Advance reservations are not happening right now," Solombrino said. He added that an increase in business in the immediate wake of the disaster, when stranded travelers were hiring car services as a way to get home, was just a blip on the map.

While the pain is spread evenly throughout the country, New York- and New Jersey-based firms are more vulnerable. Solombrino estimated that about 40 percent of the worldwide business of high-end sedan and limo companies is "Wall Street-related," and of that, "about 80 percent is based in the New York financial district." The wholesale loss of such clients as American Express, Lehman Brothers and Morgan Stanley was devastating, he said.

This week, Dav El is auctioning off 10 percent of its fleet in response to the nonexistent demand. Solombrino said his firm also was offering special rates between major East Coast cities in an attempt to promote car service as an alternative to the plane for small groups of corporate travelers.

Ironically, given prior trends, which favored the large networks, Seelinger said the mom-and-pop operators probably would fare best in the current climate, because of their lack of overhead. But Solombrino said small operators serving as network affiliates would be impacted most severely, since they have the same ratio of expenses as the larger firms but less cash.

On the positive side, creditors, including the auto manufacturers, banks and some insurance firms, have been forgiving.

"Ford Motor Credit has really stepped up to the plate to help our industry out," said Seelinger, noting that Ford had deferred payments with no increase in interest. The creditor also is allowing chauffeured car companies to extend their leases with no additional penalty, he added.

But Solombrino emphasized that such measures were temporary: "We can't expect people to float this industry for a long period of time."