Boston-based Zipcar Inc., a wholly-owned subsidiary of Avis Budget Group, Inc. (CAR), recently entered into a partnership agreement with Southwest Airlines Company (LUV), under which it will offer Zipcar membership to the airlines’ crew and its subsidiary AirTran’s employees. We believe that the collaboration will provide Zipcar an opportunity to expand its customer base thereby boosting top-line growth.
As per the agreement, approximately 45,000 of Southwest Airlines’ employees will be able to avail Zipcar’s car-sharing services across the globe at discounted driving rates throughout the week, i.e. Monday to Friday. Zipcar has already added various vehicles at 27 hotels across the country for the convenience of the crew members. The company's vehicles are available for reservation through its system accessible by phone, the Internet or wireless mobile devices.
Zipcar operates a car-sharing network and provides self-service vehicles to members in and around their residences and workplaces. However, we have noticed that since the beginning of this month Zipcar has been trying to expand its customer base through other alternatives.
In early October, the company announced that the U.S. General Services Administration's Federal Acquisition Service has selected it to provide car-sharing services to the federal employees in Washington, Chicago, Boston and New York City.
Avis Budget acquired Zipcar in Jan 2013 for a total value of $500 million. Following the acquisition, Avis Budget has been aggressively expanding Zipcar’s services at various locations and has increased Zipcar’s presence from 20 to over 26 major metropolitan markets.
We believe that the acquisition of Zipcar has facilitated this vehicle rental company to extend its offerings from car rental to car sharing and has helped it compete better with rivals such as United Rentals Inc. (URI) and Hertz Global Holdings Inc. (HTZ).
Although, the company has posted back-to-back three consecutive quarters of better-than-expected quarterly results, the stock currently carries a Zacks Rank #4 (Sell). This is due to its Senior Executive Vice President and Chief Financial Officer, David B. Wyshner’s statement, at the Deutsche Bank Leveraged Finance Conference held on Sep 30, 2014, that it would be a challenge to meet the higher-end of the company’s fiscal 2014 EBITDA guidance range of $860–$910 million.
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