Surge in Business for Alternative Transport

Aug. 11, 2006 — -- Long lines formed at airport car rental counters across the country today, and train and even private jet companies saw an uptick in inquiries from travelers looking for alternative forms of transport.

But it remains to be seen if the spike in interest will be sustained if American travelers shy away from commercial airlines after today's foiled terror plot.

After British police thwarted a plot to blow up several commercial airliners headed to the United States, the cancellation of flights and tighter security restrictions led to extended wait times at many airports. To avoid the long waits, thousands of travelers flocked to car rental companies.

But it's possible the increased business will be temporary. One car rental analyst noted that much of today's business came from travelers merely trying to get home. That does not guarantee they'll book rentals in the future.

"I don't think it's a benefit to car rental companies at all if fewer people fly," said CL King & Associates analyst Michael Gallo. "If the airlines have fewer fliers, the rental companies will have fewer customers."

Major rental companies like Hertz, Dollar Rent a Car and Thrifty Car Rental get 75 to 90 percent of their customers from airport business. Any interruption in air travel would have a corresponding effect on the number of customers renting cars.

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"Their businesses certainly are correlated," Gallo said.

The one advantage car rental companies have over commercial airlines is the ability to adjust carrying capacity in the event of a downturn. Airlines often struggle when passenger numbers go down because it's difficult to rearrange their carrying capacity.

But car rental companies have agreements with automakers that allow them to return cars when passenger numbers fall. Most rental companies did exactly that when flight capacities fell 15 to 20 percent after the Sept. 11 terror attacks, and many saw big profits in 2002 with smaller fleets.

"It's really too early to say if people backing away from the airlines is a pattern. So they won't be thinking of doing anything like that yet," Gallo said.