Avis 2006 Annual Report Download - page 15

Table of Contents
Fleet
General . We maintain a single fleet of vehicles for Avis and Budget. We rent a wide variety of vehicles, including luxury and specialty
vehicles. Our fleet consists primarily of vehicles from the current and immediately preceding model year. Rentals are generally made on a
daily, weekly or monthly basis. Rental charges are computed on the basis of the length of the rental or, in some cases, on the length of the
rental plus a mileage charge. Rates vary at different locations depending on the type of vehicle rented, the local marketplace and competitive
and cost factors. Most rentals are made utilizing rate plans under which the customer is responsible for gasoline used during the rental. We also
generally offer our customers the convenience of leaving a rented vehicle at a location in a city other than the one in which it was rented,
although, consistent with industry practices, a drop-off charge or special intercity rate may be imposed. We facilitate one-way car rentals
between corporate-owned and franchised locations in the United States that enable us to operate as an integrated network of locations.
Vehicle purchasing
. We participate in a variety of vehicle purchase programs with major domestic and foreign vehicle manufacturers. General
Motors is the featured supplier for Avis, and Ford is the featured supplier for Budget. During 2006, approximately 42%, 32% and 12% of the
cars acquired for our U.S. car rental fleet were manufactured by General Motors, Ford and Chrysler, respectively, compared to 53%, 28% and
8%, respectively, in 2005. During 2006, we also purchased Toyota, Hyundai, Suzuki, Nissan, Kia and Subaru vehicles. The decrease in the
portion of our fleet sourced from General Motors, and the number of other vehicle manufacturers from which we purchased vehicles in 2006 is
reflective of our efforts to diversify our fleet, which we expect to continue in 2007. The substantial majority of vehicles used in our rental car
business are purchased through our principal U.S. vehicle financing, which is an asset-backed facility.
Vehicle disposition . We generally hold a vehicle in our domestic fleet for a term of four to twelve months. For 2006 and 2005, approximately
88% and 95%, respectively, of the rental cars purchased for our domestic car fleet were the subject of agreements requiring automobile
manufacturers to repurchase them or guarantee our rate of depreciation during a specified period of time. Cars subject to these agreements are
sometimes referred to as “program vehicles” or “program cars” and cars not subject to these agreements are sometimes referred to as “risk
cars” or “risk vehicles”. The programs in which we participate currently require that the program vehicles be maintained in our fleet for a
minimum number of months (typically four to twelve months) and impose return conditions, including those related to mileage and condition.
At the time of return to the manufacturer, we receive the price guaranteed at the time of purchase and are thus protected from fluctuations in the
prices of previously-owned vehicles in the wholesale market at the time of disposition. The future percentages of program vehicles in our fleet
will be dependent on the availability and attractiveness of manufacturers’ repurchase and guaranteed depreciation programs, over which we
have no control, and we expect percentages for 2007 to be lower than 2006 as we acquire more risk vehicles in order to mitigate the anticipated
increased cost of program vehicles. We dispose of our risk vehicles largely through automobile auctions.
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data warehouse allows us to take advantage of comprehensive management reports, query capability and easy access to data for
strategic decision making for both brands.
• Sales and marketing systems . We have developed a sophisticated system of online data screens which enables our sales force to
analyze key account information of our corporate customers including historical and current rental activity, revenue and booking
sources, top renting locations, rate usage categories and customer satisfaction data. We use this information, which is updated weekly
and captured on a country
-
by
-
country basis, to determine opportunities for revenue growth, profitability and improvement.
•
Interactive adjustments
. We have developed a multi-linked customer data system which allows us to easily retrieve pertinent
customer information and make needed adjustments online for superior customer service. This data system links with other
accounting systems to handle any charge card transactions automatically.