With travel at a standstill, rental car companies like Hertz are hurting so bad they’re beginning to look at bankruptcy options as they default on their lease payments.
Last year, Hertz was operating with a U.S. nationwide fleet of over 567,000 vehicles, with another 200,000 internationally, spread out across 12,400 locations. That scale is now biting the rental car company in the ass, as there’s no demand, so no revenue, and now there’s no money to pay leases owed, Automotive News reports:
The company had been negotiating with lenders for relief as well as with the U.S. Treasury Department about the possibility of a bailout. But with dismal demand, a too-big fleet and plunging prices for used cars, Hertz didn’t have enough liquidity to last until a market recovery.
Hertz began laying off workers to preserve cash in March as the travel restrictions cut deep into sales.
By April 29, Hertz disclosed that it had missed substantial lease payments related to its rental cars. Creditors gave Hertz until Monday to come up with a solution, and CEO Kathryn Marinello said in an interview at the time that Hertz was doing everything it could to preserve cash and get leniency from lenders to avoid going seeking protection.
Take a moment to consider what “substantial lease payments” on over potentially 760,000 cars in the global fleet may amount to, and we begin to understand just how fucked Hertz may be if the covid-19 lockdown goes on much longer. I don’t think non-essential travel is going to immediately return to what it once was anytime soon, so that’s not a good sign.
Auto News also reported Hertz recently brought in a consulting group specializing in bankruptcy, and cited anonymous sources claiming the company was considering filing for Chapter 11 protection.
And it very well may have to, though it does seem unfair that the airline industry gets bailout money, while all of the service industries supporting the airline and travel business are quite literally left for broke.