Transport Cars

Virgin Cars? Richard Branson makes move on Advantage rental-car business

Jun 14, 2013 11:40 am

Skift Take

It’s an excellent, opportunistic move by Branson to make a bid the same week the very complacent car rental companies announced plans to boost rates on corporate customers.

— Jason Clampet

Free Report: The Changing Business of Extended-Stay Hotels

Richard Branson’s Virgin Group Ltd., the travel and entertainment conglomerate, wants to enter the U.S. rental-car business by buying the assets of the Advantage brand that Hertz Global Holdings Inc. was ordered to divest.

Virgin sent a letter dated June 7 to the U.S. Federal Trade Commission expressing its interest as the FTC decides whether to give final approval to Hertz’s $2.3 billion acquisition of Dollar Thrifty Automotive Group Inc. last November. The agency’s concern that the brand may not be viable with its new owners has delayed that decision.

“Virgin looks at opportunities where we believe our brand and service can make a difference for the customer and shake up a market,” said Nick Fox, a spokesman for closely held Virgin, who confirmed the letter. “We feel the car-rental sector is Virgin territory.”

Virgin, which Branson started in 1970 as a mail-order record shop, now is a global conglomerate with 2011 revenue of about $13 billion euros ($21 billion). London-based Virgin has since taken its style, characterized by a cheeky personality and value-priced, high-touch service, into banking, book publishing, air and space travel, hotels, and mobile-telephone service.

Virgin Atlantic airline, for example, offers free drinks and meals in all cabins, and the U.S. airline, Virgin America, has a safety video narrated by a “half snarky pal, half friendly host” who “says things like, ‘For the .0001 percent of you who have never operated a seatbelt before, it works like this,’” according to an Interbrand blog item about the airline.

Now, Virgin wants to get into the rental-car business, and it’s trying to use a delay in the final approval of Hertz’s sale of Advantage to swoop in and take over the assets and operate them under the Virgin brand.

FTC delay

The FTC made Park Ridge, New Jersey-based Hertz sell Advantage and 29 additional airport locations as a condition of acquiring Dollar Thrifty. By doing so, the FTC aimed to create a competitor strong enough to keep the three big companies, No. 2 Hertz, Avis Budget Group Inc. and closely held market leader Enterprise Holdings Inc. from having too much power.

Six months later, the FTC hasn’t completed its approval of the Dollar Thrifty transaction as it weighs the strength and viability of the Advantage brand under its new ownership, people familiar with the matter have said. Hertz sold Advantage to Macquarie Group Ltd.’s private-equity arm in a joint venture with Franchise Services of North America Inc. under a consent agreement with the FTC.

Since then, the three big rental companies, which dominate the airport car-rental market, have raised prices at a rate not seen since the recession.

Avis, which boosted prices twice in June, said it has “continued to aggressively implement pricing increases in North America.” In the first quarter, Avis raised prices six times and attributed it in part to Hertz’s deal for Dollar Thrifty.

Virgin is working with MCG Global LLC, an investment and management advisory firm co-founded by Vince Wasik, former executive vice president of Hertz and a former chief executive officer of National Car Rental.

Peter Kaplan, a spokesman for the FTC, declined to comment.

Editors: Jamie Butters, Fred Strasser, Bill Koenig. To contact the reporter on this story: Mark Clothier in Southfield, Michigan, at mclothier@bloomberg.net; Sara Forden in Washington at sforden@bloomberg.net. To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net; Michael Hytha at mhytha@bloomberg.net.

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