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Avis Branches Out Zipcar Services

Zacks Equity Research

Zipcar Inc., a wholly-owned subsidiary of global vehicle rental giant, Avis Budget Group Inc. (CAR), kicked off its car sharing services at eight new airport locations across the North American continent. With this, Zipcar’s services will now be available at eleven airport locations.

Seven of the eight newly added airports are located in the U.S. while one is situated in Canada. The airports comprise Hartsfield-Jackson Atlanta International Airport (ATL), Austin-Bergstrom International Airport (:AUS), Los Angeles International Airport (:LAX), Palm Beach International Airport (PBI), Philadelphia International Airport (:PHL), Phoenix Sky Harbor International Airport (PHX), Mineta San Jose International Airport (:SJC) and Toronto Pearson International Airport (:YYZ).

The company has decided to charge its members in the range of $9.00 – $12.00 per hour or $69.00 – $89.00 on a per day basis, depending on the location, vehicle chosen and the plan opted by the member.

Avis Budget, which competes with JTH Holding, Inc. (TAX), acquired Zipcar in Jan 2013 for a total value of $500 million. Following the completion of acquisition, Avis Budget has been aggressively expanding Zipcar’s services at various new locations. Last month, Zipcar initiated its airport services in the continent by starting its operations at three locations - Newark Liberty (:EWR), LaGuardia Airport (:LGA), and John F. Kennedy International Airport (:JFK).

In the United States alone, car sharing is currently a lucrative business worth nearly $400 million and is rapidly advancing in other parts of the world. With over 760,000 members, Zipcar enjoys presence in 20 major cities of the U.S., Canada and Europe.

We believe that the acquisition of Zipcar has facilitated Avis Budget in expanding its offerings from car rental to car sharing and compete with rivals such as United Rentals Inc. (URI) and Hertz Global Holdings Inc. (HTZ). The latter has its own car sharing service, Hertz On Demand.

Avis Budget, which currently carries a Zacks Rank #3 (Hold), expects the acquisition to generate an annual synergy in the range of $50–$70 million. Zipcar is engaged in operating a car sharing network, providing self-service vehicles to members located in reserved parking spaces throughout the neighborhoods where they live and work. The company's vehicles are available for use through its reservation system accessible by phone, internet or wireless mobile devices.

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