Avis Fixed the Fleet. Now It Has to Fix the Price.
A third operating transformation—this time in revenue management—arrives after a $50 million Q3 EBITDA miss and an 83% drawdown from the April peak.
CAR · Earnings Call · 2026-11-04
The operating machine works. The P&L does not.
Avis Budget Group reported a quarter that should have been a victory lap for its operating team. The Americas fleet was 6.5% smaller year-over-year, global utilization rose 200 basis points to 74%, and Americas utilization reached 74.1%—the highest for any quarter in 20 years. Revenue per day was slightly positive in both segments. Yet adjusted EBITDA fell 8% to $513 million, and management conceded it had missed its own July forecast by about $50 million: “we delivered $513 million, which was roughly $50 million below what we anticipated when we spoke to you in July” — Brian Choi, Chief Executive Officer · 2026-11-04. The stock has already rendered a verdict. At roughly $120, Avis sits 83% below its April peak and 28% below its late-July high. The gap between operating KPIs and financial outcome is the story. The last filed quarter showed just how far the profitability engine has fallen from the pandemic boom: operating margin of 2.4%, versus 30.2% at the 2022 peak. Fleet productivity has been real. It has not been enough.Fleet productivity is real—and no longer enough
The company's fleet productivity story is not new. It has been the anchor for several quarters, and the current call again led with it. The gains are genuine: Americas rental days fell less than 3% despite a fleet down 6.5%, and utilization absorbed much of the demand shock. Avis also did this while managing a fix recall problem that grounded roughly 18,000 vehicles entering the quarter and 14,000 exiting it. Those grounded vehicles carried about $23 million of depreciation, interest, and related costs in Q3, bringing the year-to-date total to $79 million before lost profits. That is a legitimate operational achievement. But it is also increasingly old news. The market has watched Avis improve utilization for four consecutive quarters. What it has not seen is the revenue line follow. The company can sweat fewer cars more efficiently; it still has to persuade customers to pay more for them. That is why the quarter's real reveal was not the fleet—it was the admission that the pricing engine is obsolete.Demand cracked in August; cost leverage amplified it
The trigger was a demand hole that opened in August. TSA check-ins fell 4.4% that month, and the third-quarter decline of 2.8% was, in Daniel Cunha's words, “the steepest decline since the first quarter of 2021” — Daniel Cunha, Chief Financial Officer · 2026-11-04. International inbound travel was worse: CBP I-94 data showed an 8% drop, and flight capacity into Europe from the Middle East was down 8%. The company's airport-heavy mix made it especially exposed to what management called soft demand. The rental volume shortfall then collided with semi-variable costs that could not be cut fast enough—staffing, shuttling, and vehicle positioning. Americas operating expense per rental day rose about 1% to $42.38, costing roughly $14 million of operating leverage. This was not a complete surprise. On the prior call, Brian Choi had already flagged the trend: “the demand environment weakened... TSA is down roughly 2% month-to-date in terms of emplanements” — Brian Choi, Chief Executive Officer · 2026-07-29. And in July he had guided to “roughly flattish pricing in Q3” — Brian Choi, Chief Executive Officer · 2026-07-29. What management did not anticipate was the August acceleration. The Q4 guide—about $165 million of EBITDA versus $5 million last year—looks dramatic, but it leans on an easy comparison against last year's government shutdown and recall disruption. Full-year EBITDA is now guided to approximately $850 million, the low end of the July range.The third transformation is an admission
The genuinely new material on this call was revenue management. Choi framed it as the third pillar of a multiyear overhaul: fleet in 2024, the Compass field operating system in 2025, and now pricing. The confession was blunt. Avis's Demand Fleet Pricing system was built more than 15 years ago and cannot optimize length of rental, price, vehicle availability, and contribution margin together. In Choi's words:The new vocabulary is yield curve management and, remarkably, cancellation policy. Avis is now talking like an airline: it wants a booking curve that slopes up rather than down, fewer but deeper channel integrations, and an industry that stops treating rental cars as the only travel sub-sector without cancellation fees. Choi said plainly: “We're the only sub-industry within the travel sector that doesn't really have a cancellation policy” — Brian Choi, Chief Executive Officer · 2026-11-04. The agentic AI wave is the forcing mechanism; AI shopping traffic is still under 1% of Avis traffic, but management expects it to grow and to punish a downward-sloping yield curve. The upside case is leverage: “Our $10 billion-$12 billion revenue base, small improvements yield dramatic results to the bottom line” — Brian Choi, Chief Executive Officer · 2026-11-04. The problem is timing. Tangible financial benefit is targeted for summer 2027. That is a long time to wait when the equity is already down 83%.DFP was developed to choose simplistically between length and yield... The current system as it stands is overly biased towards taking length. I think it's suboptimally taking reservations too early.