Hertz files for bankruptcy
May 24, 2020 1:33 pm
Hertz filed for bankruptcy Friday night, the latest victim of the sudden economic downturn sparked by the Covid-19 pandemic.
The company has been renting cars since 1918, when it set up shop with a dozen Ford Model Ts, and has survived the Great Depression, the virtual halt of US auto production during World War II and numerous oil price shocks.
By declaring bankruptcy, Hertz says it intends to stay in business while restructuring its debts and emerging a financially healthier company.
“The impact of Covid-19 on travel demand was sudden and dramatic, causing an abrupt decline in the company’s revenue and future bookings,” said the company’s statement. It said while it too immediate action in response to the crisis, “uncertainty remains as to when revenue will return and when the used-car market will fully re-open for sales, which necessitated today’s action.”
The filing is arguably the highest-profile bankruptcy of the Covid-19 crisis, which has prompted bankruptcies by national retailers like JCPenney, Neiman Marcus and J.Crew, along with some energy companies such as Whiting Petroleum and Diamond Offshore Drilling.
But none of the companies to file so far have had such as large a share of their industry as does Hertz, which along with rivals Avis Budget (CAR) and privately held Enterprise dominate the rental car industry.
The entire rental car industry has been devastated by the plunge in travel since the pandemic hit earlier this year.
Nearly two-thirds of its revenue comes from rentals at airport locations, and air travel has fallen sharply.
Since the start of April, the number of people passing through TSA checkpoints at US airports has plummeted 94% compared with a year ago.
A bankruptcy filing does not mean a company will be forced out of business.
Many companies have gone through the process and gone on to post record profits, including automaker General Motors (GM) and many of the nation’s airlines. But many companies that have filed for bankruptcy with the intention of staying in business have not survived the process.
Hertz said the bankruptcy process will give it “a more robust financial structure that best positions the company for the future as it navigates what could be a prolonged travel and overall global economic recovery.”