Hertz UAE not affected by global car rental giant's Chapter 11 bankruptcy filing in US

The company's UAE franchise partner 'will not be part' of the reorganisation process

The car-rental giant Hertz Corporation filed for bankruptcy last month. AFP

Car rental firm Hertz UAE will continue operations in the country as normal despite the global car rental giant filing for bankruptcy in the US.

The company operates locally under a franchise owned by the Al Futtaim Automotive Group and as such "remains open for business and continues to serve its customers as usual”, Hertz UAE said on Monday in a statement.

The company said Hertz UAE is a separate entity from Hertz Global Holdings and “will not be part of the chapter 11 reorganisation process” that the global company and some of its US and Canadian subsidiaries are subject to.

Hertz Global Holdings filed for bankruptcy last month after sweeping travel restrictions and the global economic collapse destroyed demand for its vehicles amid coronavirus pandemic. It has nearly $19 billion (Dh70bn) of debt as of the end of 2019, according to Reuters.

Hertz, originally known as Rent-a-Car, was founded in Chicago in 1918. It was operating from 12,400 locations worldwide as of February, according to a filing.

The company named Paul Stone as its new chief executive on May 18 and revealed on May 22 that that it had filed for Chapter 11 protection in the US Bankruptcy Court for the District of Delaware.

Chapter 11 provides protection from creditors, allowing a business to restructure while remaining in operation.

"The impact of COVID-19 on travel demand was sudden and dramatic, causing an abrupt decline in the company's revenue and future bookings," the company said in a statement. "Hertz took immediate actions to prioritize the health and safety of employees and customers, eliminate all non-essential spending and preserve liquidity. However, 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."

It said its principal international operating regions in Europe, Australia and New Zealand were not included in the proceedings, nor were its franchise operations, which "are not owned by the company".

It also said that all of its businesses, including the  Hertz, Dollar, Thrifty, Firefly and other rental businesses remained open.

A number of airline and tourism companies have reported huge losses as countries have carried out strict lockdown measures to contain the spread of the coronavirus that has so far claimed the lives of more than 400,000 people. More than 7 million people have been infected worldwide, according to the latest data from the US-based Johns Hopkins University that is tracking the disease.

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Coronavirus around the Middle East:

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The travel and tourism has been severely affected by the measures put in place to control the pandemic. Global airlines are expected to lose $314bn in passenger revenue this year, a 55 per cent drop from 2019, the International Air Transport Association said in April.

A large portion of Hertz’s revenue comes from car rentals at airports, which have all but evaporated as potential customers avoid travel.

In the UAE, the company has been operating for more than 25 years.