Hertz' bankruptcy restructuring allowed the rental car company to exit or renegotiate "a number of unprofitable [corporate] contracts," which later became "almost all of our [corporate] contracts," Hertz interim CEO Mark Fields said Wednesday during a fourth-quarter earnings call.
"We view as corporate and business travel returns, that will be a favorable tailwind for us," he added. Business travelers "tend to travel in the beginning of the week where utilization is low. That will improve our [revenue per unit] quite substantially."
The ability to exit or renegotiate pre-Covid corporate contracts could prove advantageous. During the Avis Budget Group earnings call on Feb. 15, CEO Joe Ferraro noted that his company's large corporate contracts were "negotiated a while back. Those rates are what they are. It's the mid- and small business that allows us to have higher rates." CFO Brian Choi added that "large, contracted business always had headwinds regarding rates."
As for Hertz, Fields added that rates for small and midsize client are more attractive, but large corporations provide volume and stability. "Combine that with the renegotiation of all those contracts, we are quite pleased with that business as it comes back over time," he said. "Even if it doesn't come back at levels pre-Covid, we are well-positioned."
The company also suggested corporate clients have "a lot of interest" in their business travelers renting electric vehicles. Hertz has a partnership with Tesla and now offers EVs in nine U.S. markets. Demand is good and customers are willing to pay a premium, and they are satisfied with the experience, Fields said, adding that Hertz is "very bullish" on its ability to grow this business as vehicles are delivered. The company now has 700 Level 2 chargers in 65 markets.
Hertz reported fourth-quarter 2021 revenue of $1.9 billion, up 58 percent year over year, but down 26 percent compared with 2019. The company also had quarterly adjusted net income of $426 million. Full-year 2021 revenue was $7.3 billion. Both fourth-quarter adjusted corporate earnings before interest, taxes, depreciation and amortization of $628 million and full-year adjusted corporate EBITDA of $2.1 billion were company records.
The Americas segment reported $1.7 billion in revenue for the quarter, just 2 percent below 2019 levels. According to the company's annual report filed with the U.S. Securities and Exchange Commission, of the Americas segment, 25 percent of revenue and 29 percent of transactions for 2021 came from business travel. Internationally, the shares were 52 percent and 50 percent, respectively.
The newly named CEO Stephen Scherr steps into his role on Feb. 28.
RELATED: Hertz Q3 2021 earnings