With the sector awash in cars, shares of rental companies spike on Hertz plans to cut back

Industrials Associated Press

The difference between the airline and rental car industries extends beyond the altitude at which travel occurs.

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Airline stocks are flying, too, having risen by more than 60 percent over the past year as a group. Shares of Avis are essentially flat in that same period and shares of Hertz are down 28 percent.

The difference is capacity. Airlines have slashed theirs, cramming more passengers into each plane, while the rental car industry has thousands of vehicles sitting unused for a good portion of each month despite a huge consolidation in the industry.

It is in that light that an announcement by Hertz this week that it would take actions that might alleviate the glut of rental cars sent shares of both Hertz and Avis sharply higher Friday.

Hertz also said Thursday that it will close about 200 non-airport locations in the U.S., which is about 5 percent of those locations and 1 percent overall. The measure will also save the company about $10 million per year.

The company also said that it will raise rates at Hertz, Dollar and Thrifty rentals in the U.S. because it expects strong seasonal demand at the same time that it is making fewer additions to its fleet. The price hikes will go into effect in middle of next month.

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Shares of Hertz Global Holdings Inc. rose $1.03, or 5.3 percent, to $20.59 in afternoon trading. Avis Budget Group Inc. shares gained $4.08, or 8 percent, to $55.15.