Airports seek to protect revenue from rental cars in Hertz bankruptcy

Hartsfield-Jackson joins them

Hartsfield-Jackson International is among the airports seeking to protect revenue they get from rental cars in the Hertz Corp. Chapter 11 bankruptcy.

It and other airports filed in court to explicitly exclude from Hertz's use the fees rental companies collect from drivers and pass on to airports or governments to pay off airport facilities.

Hertz, which filed for bankruptcy protection in May after a sharp decline in travel due to the coronavirus pandemic, said in a court filing that its airport locations are "the backbone" of its car rental business and drive the majority of its revenue.

Hertz Corp. rents cars under the Hertz, Dollar Rent A Car and Thrifty Car Rental names.

Moody’s ratings agency said in a report earlier this month that Hertz and its Dollar and Thrifty brands account for about a third of the car rentals at U.S. airports.

Hertz is seeking bankruptcy court approval to pay certain fees and charges due to airports, including customer facility charges that their customers pay.

Those customer facility charges, known as CFCs, are pass-through charges to rental car customers that fund airport facilities and bond payments for those facilities.

Rental car customers at Hartsfield-Jackson pay a $5 customer facility charge for each day they rent a car. The CFCs go to pay off City of College Park bonds for the airport's $642 million rental car center and Sky Train to the center.

A consortium of 15 airports around the country including Hartsfield-Jackson said this week they support Hertz’s continued payments but filed a limited objection “in an abundance of caution.”

The airports want to ensure that CFCs are to be held in trust and passed onto airports, and that are not the property of Hertz in the bankruptcy to be used as collateral for loans.

“These funds are collected by the rental car companies on our behalf and should be excluded from any ownership by the rental car companies,” Hartsfield-Jackson said in an e-mail.

Moody’s said Hertz’s bankruptcy “could reduce the revenues available to bondholders if CFCs collected by Hertz for airports are trapped in the bankruptcy proceedings” or if Hertz significantly cuts back its operations.

The airports also sought clarification that all CFCs would be protected regardless of the type of CFCs. Airports in Orlando and Indianapolis this week joined the consortium of 15 airports calling for the assurances from the bankruptcy court.

Even with ongoing CFC collections, airports still expect to see sharp declines in revenue from car rentals and other contractors, since fewer people are traveling and renting cars.

The Atlanta City Council in March approved rent relief for rental car agencies and concessionaires at the airport as travel plummeted.

Hartsfield-Jackson expected to collect about $40.9 million in car rental revenue this fiscal year ending June 30. Based on the decline in traffic due to COVID-19, it now expects to collect $30.8 million this fiscal year and $18.6 million next fiscal year.