The COVID-19 pandemic sure hit the global economy hard. Businesses around the world have been struggling due to their countries being in lockdown. Most have been forced to close up shop or lay off workers just to survive these past few months. But if there is any business that has been hit particularly hard by the pandemic, it is the travel and tourism industries. Airlines, hotels, and yes, even the rent-a-car business.

Simply put, the rental car business is on the brink of collapse. In fact one of the biggest rental car companies in the world, Hertz, is even close to bankruptcy.

According to reports, the company missed a payment to lenders in April for the leasing cost of its vehicles. Fortunately, lenders have extended the deadline for certain loan repayments, giving the company more time to come up with a financing plan. From the original due date of April, the deadline has now been extended to May 22.

Had the payments not been delayed, one of the options Hertz was considering was filing for bankruptcy. Fortunately, the extra time allowed the rental car company time to draw up a new strategy to account for the impact of the pandemic and its cash needs. At the moment, Hertz has not disclosed how it plans to do so. However, it is expected that sales will continue to fall at least until June, or when the airline industry returns.

Most auto rental companies, including Hertz, are largely dependent on airports and passenger travel both in the US and in Europe. However, with most countries around the world still under lockdown, and non-essential travel banned, no one is traveling at this time. As a result, no one is renting cars.

Since last month, Hertz has already laid off 10,000 employees across its North American operations. With the pandemic continuing to affect most countries, it seems like it might take time before the car rental industry returns to normal.

As social distancing will likely become the new norm, it could bring a rebirth to car rental companies as ride-hailing apps like Grab and Uber will be likely affected. The only problem now is that car rental companies like Hertz need to be able to survive the slump in revenue during these tough times, and hopefully don’t file for bankruptcy before then.

Source: Financial Times, Reuters