German Car-Rental Company Sixt Seizes Opportunity in U.S.
Despite lower demand due to coronavirus, Europe’s second-largest car-rental company is pushing ahead with rapid expansion
As the coronavirus pandemic has crushed the car-rental industry, Germany’s Sixt SE is seeking to accelerate its expansion in the U.S.
The parent company of Sixt Rent-a-Car, which specializes in premium vehicles and is Germany’s largest car-rental company by market share, acquired concessions at 10 U.S. airports from the parent company of Advantage Rent a Car in a bankruptcy sale earlier this month.
Alexander Sixt, the company’s chief strategy and technical officer, said the $16 million deal, which closed Friday, would give the company concessions at New York City’s three major airports: John F. Kennedy International, Newark Liberty International and LaGuardia.
Some car-rental companies are floundering after the pandemic exacerbated longstanding debt problems amid fierce industry competition. The parent company of Advantage Rent a Car filed for bankruptcy protection at the end of May, the same month as Hertz Global Holdings Inc.
Sixt is less burdened than its competitors by debt and is better suited to survive a recession, said Constantin Hesse, an analyst at Jefferies International Ltd., in London.
Sixt is one of Europe’s largest car-rental companies, posting revenue last year of €3.3 billion ($3.7 billion). The company has a small footprint in the U.S. Before the Advantage deal, Sixt had 75 locations in the country, mostly off-airport, and just 2% of market share, according to Jefferies. U.S. sales last year totaled about $475 million.
The U.S. is the world’s biggest car-rental market, worth an estimated $30 billion, according to analysts at German bank Hauck & Aufhäuser. Mr. Sixt said more than half of that business is conducted at the nation’s 58 largest airports.
Sixt began to expand beyond Germany 30 years ago, growing to become Europe’s second-largest car-rental company. It first entered the U.S. in 2011. Mr. Sixt said competitors have held on tight to concessions spaces, especially within terminals at major airports, forcing Sixt to make do with off-airport locations.
The deal with Advantage will see Sixt take over terminal concessions in cities such as Boston, Houston, Orlando and Denver. Sixt executives particularly prize the three airports in the New York metro region, which served a combined 141 million passengers last year.
The company said it aims to secure a 10% market share across the 10 U.S. airports where it has acquired the new concessions. At Miami International Airport, where Sixt has had an on-airport presence since 2011, it has an almost 13% market share, according to analysts. The company has a U.S. sales target of $1 billion in the next five years.
First it must survive the pandemic, which has decimated air travel.
In the New York region, airline-passenger volumes are recovering more slowly than other forms of transportation. The Port Authority of New York and New Jersey, which operates the three airports, said weekday passenger volumes in early June were 92% lower than the same period last year. The Port Authority forecasts that passenger levels won’t recover to 2019 levels until sometime between the second quarter of 2021 and the third quarter of 2023.
At most airports, like in the New York area, car-rental companies must pay the operator a minimum annual payment on top of a percentage of sales. A Port Authority official said car-rental companies continue to ask the agency for relief.
Mr. Sixt, a great-grandson of founder Martin Sixt, said the pandemic is the greatest challenge the company has faced. In the first quarter of this year, the company lost €5.1 million. Mr. Sixt said second-quarter results would be significantly worse.
Still, he added, there are signs in Europe that leisure travel is picking up. And with competitors struggling, the family spots an opening.
“I read this beautiful quote about Ayrton Senna the other day,” Mr. Sixt said, citing the Formula One champion, “where he said it’s hard to win a race when it’s sunny, but he can easily overtake 16 cars when it’s raining.”
Write to Paul Berger at Paul.Berger@wsj.com