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Avis Budget Group Reports Results for First Quarter 2008

First quarter revenue increased 6%, to a record $1.4 billion.

Generated EBITDA of $44 million and pretax loss of $5 million excluding mark-to-market hedge losses.

Reported pretax loss of $18 million in seasonally weakest quarter.

Projects revenue and earnings growth for 2008 compared to 2007.

PARSIPPANY, N.J., May 6 -- Avis Budget Group, Inc. today reported results for its first quarter, which ended March 31, 2008. For the first quarter, revenue was $1.4 billion, an increase of 6% versus first quarter 2007, and a pretax loss of $18 million in the Company's seasonally weakest quarter. Excluding mark-to-market losses on interest rate hedges, EBITDA was $44 million and the Company's pretax loss was $5 million. We expect the mark-to-market hedge losses to be offset in future quarters by the effects of favorable interest rates.

"The first quarter was very consistent with our expectations at the outset of the year. Industry pricing pressures that began in December continued throughout January and early February, but subsided over the balance of the quarter. Rental volumes were solid, reflecting growth in airport and off-airport transactions, and amounts received upon disposition of our used vehicles were in line with historical norms," said Avis Budget Group Chairman and Chief Executive Officer Ronald L. Nelson.

"More importantly, we continued to make significant progress in our Performance Excellence process improvement initiative and in our efforts to penetrate additional distribution channels to fuel revenue growth. As a result, we are reiterating our forecast of revenue and earnings growth in 2008," Mr. Nelson said.

Executive Summary

In the first quarter, our car rental revenues increased 7% year-over-year, driven primarily by a 4% increase in rental days and a 17% increase in ancillary revenues. Time and mileage revenue per day rates for our car rental operations were virtually unchanged versus first quarter 2007 as leisure pricing was challenged, especially in January. Commercial time and mileage rates per day also decreased slightly, although we continued to achieve modest price increases on our commercial contract renewals.

Our car fleet costs increased 7% due to a 3% increase in our fleet to support volume growth, a 2% increase in our per-unit fleet costs and a 2% increase due to foreign exchange movements. Our disposition of risk cars progressed well, and our fleet costs benefited from longer hold periods. Other operating expenses, excluding fleet-related costs, increased to 53.0% of revenue, primarily due to lower Domestic daily rental rates and increased gasoline costs.

Truck rental revenue declined slightly and EBITDA was flat as a 2% increase in rental days and lower fleet costs were offset by price declines versus first quarter 2007. The increase in rental days was driven by increased commercial rentals, while local consumer and one-way rental volumes continued to experience softness as the housing market remained weak. Pricing declined across all sectors of our business, and the reduction in one-way rentals, which typically have a higher daily rate, magnified the decline in average daily rate.

Our first quarter results also included $13 million of vehicle interest expense related to the mark-to-market of certain derivatives which hedge our exposure to interest rates in 2008.