Zipcar and SiriusXM Radio Help Avis Budget Post Stronger First Quarter

Avis Budget Group's Zipcar had its most profitable quarter ever, and installing SiriusXM Satellite Radios in 200,000 of the group's vehicles drove an increase in Avis Budget Group's ancillary revenue per day.

Those were a couple of the highlight's in Avis Budget Group's first quarter of 2014 in which it posted net income of $4 million, reversing a $46 million loss a year earlier. Revenue was up 10% to $1.86 billion in a seasonally weak Q1.

Zipcar contributed $68 million in revenue to the Group in the first quarter, overwhelmingly in North America, and the $5 million in adjusted EBITA (earrings before interest, taxes and amortization) it chipped in made this the most profitable quarter in Zipcar history.

Avis Budget Group acquired Zipcar for $500 million in March 2013. The car-sharing service was founded in 2000.

In the 14 months or so since the acquisition, Zipcar has launched in 30 airports and more than 30 college campuses. Membership has increased 11%, and Zipcar recently launched one-way service in Boston. AvisBudget and Zipcar are also sharing fleets, matching supply and demand during the week and on weekends to increase efficiencies.

One interesting point that Avis Budget Group CEO Ron Nelson made during the company's first quarter earnings call May 8 is that Zipcars rent for a "premium" compared with other rentals.

"And I think the thing that has really captured all of our thinking is the fact that these cars rent for a relatively significant premium over Avis and Budget rentals," Nelson said. "Now part of it obviously is the all-inclusive nature of insurance and gas and T&M, but part of it also is the service proposition that it offers to Zipcar members."

"I mean they simply get off the bus, they go right to their car," Nelson said. "They swipe their smart card and they're off and running."

In other words, Zipcar members are getting a convenient service in being able to rent by the hour, and with all fees included, but their rentals are pricey relative to daily or weekly rentals from Avis or Budget.

In other news, Avis Budget Group increased its ancillary revenue 7% per day in the quarter to $551 million, and the main driver of that ancillary revenue jump was the factory installation of SiriusXM Satellite Radios, which can be activated at the counter, in 200,000 vehicles.

On Avis.com today, a traveler could add a SiriusXM Satellite Radio for $6.99 for the first day, and $3.99 for additional days.

Nelson said the SiriusXm satellite radio launch "significantly increased our expectations."