When Hertz Global Holdings lowered its full-year outlook this week amid weak volume at its U.S. airport car rental business, it came as no surprise to officials at The Eastern Iowa Airport.
Park Ridge, N.J.-based Hertz, one of the rental car operators at the airport, sees adjusted per-share earnings of $1.68 to $1.78, a 10-cent cut on both ends, based on 465 million outstanding shares.
Hertz also expects revenue of $10.8 billion to $10.9 billion, compared with its earlier view of $10.85 billion to $10.95 billion.
Don Swanson, the airport’s director of finance and administration, told the Cedar Rapids Airport Commission in February that the regional airport expects to receive 9 percent less revenue from rental car providers over the next five years.
Total minimum annual guaranteed revenue will slip from the existing $1.4 million to $1.3 million, Swanson said.
Rental car revenue is important because the city-owned airport does not receive property tax revenue, deriving its annual income from user fees, federal and state grants, state vertical infrastructure grants, concession revenue and farm income.
Swanson said a survey of other airports seeking rental car proposals found many expecting double-digit reductions in minimum annual guaranteed revenue.
“When we received the bids for our current contracts in January 2008, it was just before the economic downturn,” Swanson said. “We received really good minimum annual guarantees.
“We were expecting lower minimum guarantee proposals this time because some rental car providers have not been able to meet their existing minimum annual guarantees for the last three or four years.”
Swanson on Friday said gross rental car revenue for January through August of this year was up 5 percent from the same period of 2o12, and Hertz rental car revenue was up 6 percent. That changed in August, as gross rental car revenue fell 3 percent from August 2012.
Hertz shares tumbled 11 percent on the company’s revised earnings and revenue forecast.
Hertz Global Holdings Chairman and Chief Executive Mark Frissora said in a statement that the weaker airport rental car volume also generates related fleet issues, including lower use and inability of the used car market to absorb the company’s excess vehicles at current market prices.
Swanson said if rental car traffic picks up in later years of the contracts, the airport will receive additional revenue under the terms of the agreements. The new agreements, which took effect April 1 and run through March 31, 2018, also added the Budget brand to those available at the airport.
Business travel accounts for about 60 percent of the passenger traffic at The Eastern Iowa Airport, and leisure accounts for the remaining 40 percent.