Avis 2012 Annual Report Download - page 16

9
In 2012, on average, approximately 46% of our rental car fleet was comprised of vehicles subject to agreements requiring
automobile manufacturers to repurchase them or guarantee our rate of depreciation during a specified period of time, or
vehicles subject to operating leases. Cars subject to these agreements are sometimes referred to as “program” cars and cars
not subject to these agreements are sometimes referred to as “risk” cars. Such agreements require that program cars be
maintained in our fleet for a minimum number of months (typically four to eleven months) and impose return conditions,
including those related to mileage and condition. At the time the car is returned, 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. Of
the approximately 511,000 vehicles sold in 2012, approximately 62% were sold pursuant to repurchase or guaranteed
depreciation programs. The future percentages of program and risk cars in our fleet will be dependent on the availability and
attractiveness of manufacturers’ repurchase and guaranteed depreciation programs.
We dispose of our risk cars largely through automobile auctions, including auctions that enable dealers to purchase vehicles
online more quickly than through traditional auctions, as well as through direct-to-dealer sales. In 2012, we also launched the
Ultimate Test Drive retail car sales program, which offers customers in certain states in the United States the ability to
purchase Avis and Budget rental vehicles through a collaboration with AutoNation, Inc.
Our car rental business is subject to seasonal variations in customer demand, with the summer vacation period representing
the peak season. The seasonal variation in demand, along with more localized changes in demand at each of our locations,
causes us to vary our fleet size over the course of the year. For 2012, our average monthly car rental fleet size ranged from a
low of approximately 406,000 vehicles in January to a high of approximately 550,000 vehicles in July. Our average monthly
car rental fleet size typically peaks in the summer months. Compared to 2011, our average fleet size increased approximately
26% in 2012, primarily due to the inclusion of Avis Europe’s fleet for a full year in 2012 compared to a partial year in 2011.
Average fleet utilization for 2012, which is based on the number of rental days (or portion thereof) that vehicles are rented
compared to the total amount of time that vehicles are available for rent, ranged from 77% in March to 64% in December.
Our calculation of utilization may not be comparable to other companies’ calculation of similarly titled statistics.
We have focused on and expect to continue to focus on the environmental profile of our car rental fleet, as measured using
the United States Environmental Protection Agency (“EPA”) SmartWay Certification program. Many of the model-year 2012
and 2013 rental cars in our fleet meet the standards for EPA SmartWay Certification. We also offer several different models
of gas/electric hybrid cars for rent, as well as flex fuel cars for those seeking to minimize environmental impact through use
of E-85 ethanol fuel.
We place a strong emphasis on vehicle maintenance for customer safety and customer satisfaction reasons, and because quick
and proper repairs are critical to fleet utilization. To accomplish this task we employ a fully-certified National Institute for
Automotive Service Excellence (“ASE”) technician instructor and have developed a specialized training program for our 373
technicians who operate in approximately 95 maintenance and damage repair centers for both Avis and Budget in the United
States. Our technician training department also prepares its own technical service bulletins that can be retrieved electronically
at our repair locations. Approximately 68% of our U.S. technicians are ASE-certified.
Customer Service
We believe our commitment to delivering a consistently high level of customer service across all of our brands is a critical
element of our success and strategy. Our Customer Led, Service Driven program focuses on improving the overall customer
experience based on our research of customer service practices, improved customer insights, executing our customer
relationship management strategy and delivering customer-centric employee training. Associates and managers at our
Company-operated locations receive customer resolution training and are empowered to resolve most customer issues at the
location level. In addition, we have simplified our rental agreements for both the Avis and Budget brands to make them easier
for our customers to read and understand. We continuously track customer satisfaction levels by sending location-specific
surveys to recent customers and utilize detailed reports and tracking to continually find ways to improve our customer service
delivery and the overall customer experience. In 2012, we received over 700,000 responses to our online customer
satisfaction surveys. Our surveys ask customers to evaluate their overall satisfaction with their rental experience, among other
things. Results are analyzed in aggregate and by location to help further enhance our service levels to our customers.
Airport Concession Agreements
We generally operate at airports under concession agreements with airport authorities, pursuant to which we typically make
airport concession payments and/or lease payments. In general, concession fees for on-airport locations are based on a
percentage of total commissionable revenue (as defined by each airport authority), subject to minimum annual guaranteed
amounts. Concessions are typically awarded by airport authorities every three to five years based upon competitive bids. Our
concession agreements with the various airport authorities generally impose certain minimum operating requirements,