Car rental company Hertz has filed for bankruptcy in the US after revenues took a serious nosedive due to the Covid-19 pandemic. The company which heavily relies on car rentals at airports but has suffered the worst consequences of Covid-19 travel restrictions.
As world governments imposed lockdowns, airports ceased operations which led to car rental cancellations. Hertz, which is the world’s largest car rental service watched in limbo as it lost over US$350 million in revenue. And as revenues continued to dwindle, Hertz was continually denied funding by the US government leading to the unfortunate decision to have 20000 employees be laid off or forced to take leave of absence. To top it all off, CEO Kathryn Marinello resigned after only four years of service.
“Uncertainty remains as to when revenue will return and when the used-car market will fully re-open for sales, which necessitated today’s action,” said the statement released by Hertz after revealing that the entity had filed for bankruptcy chapter 11. Under this chapter, Hertz will not shut down but will reorganize its business until it becomes profitable again.
Hertz has admitted it has US$ 1 billion in cash within its coffers which will allow it to continue operating while it impatiently waits for a bailout. The cash on hand, however, is only a temporary relief which may run out sooner than expected. “Depending upon the length of the COVID-19 induced crisis and its impact on revenue, the Company may seek access to additional cash” Hertz admitted.
While history shows that many companies that have filed for bankruptcy did not survive after, Hertz’ new CEO Paul Stone remains hopeful. “Today’s action will protect the value of our business, allow us to continue our operations and serve our customers, and provide the time to put in place a new, stronger financial foundation to move successfully through this pandemic and to better position us for the future,” Stone reassured.