Shares of Avis Budget Group (NASDAQ:CAR) fell 5% and Hertz Global Holdings (NASDAQ:HTZ) declined Friday after lawmakers in the U.S. Senate moved forward with funding to restore most operations at the Department of Homeland Security, a development that undercut the surge in demand the rental companies had experienced amid airport security disruptions.
Early Friday the Senate passed a bill to fund the bulk of the Department of Homeland Security. The measure, which must still clear the U.S. House of Representatives and be signed by President Donald Trump, passed by voice vote. The action paves the way for an end to the partial government shutdown that had contributed to snarled airport security and prolonged passenger screening lines.
The pullback in rental car shares followed a separate statement by President Trump on Thursday that he would sign an emergency order directing the Homeland Security secretary to immediately pay Transportation Security Administration agents while lawmakers worked to reach a legislative resolution. That statement came as Congress moved toward a funding measure, removing a source of uncertainty that had driven travelers to seek alternatives to air travel earlier in the week.
Earlier in the week, both Avis and Hertz had benefited from the airport chaos. Hertz stock climbed roughly 9.2% on Thursday and Avis jumped 13% - its largest one-day gain since June - as hours-long security lines prompted some travelers to look for alternate modes of transportation. Hertz reported that traffic to its website increased by about 15% over the week as customers searched for options to avoid disrupted flights and long screening waits.
Both companies sought to capture the surge in demand by promoting discounts on last-minute bookings and one-way rentals, positioning those offerings to travelers keen to bypass airports affected by the shutdown-related security delays.
Summary
- Sustained airport security disruptions helped lift rental car demand earlier in the week.
- Senate action to fund most of DHS and the president's emergency-pay statement reduced that short-term tailwind.
- As these developments unfolded, shares of Avis and Hertz gave back recent gains.
Key points
- Congressional movement to fund DHS and the requirement of House approval and presidential signature are central to resolving the airport security issues - affecting travel and ground-transport services.
- President Trump said he would order immediate pay for TSA agents, a step that lessened airport operational strain and demand for alternate transportation solutions.
- Travel-related sectors, including rental cars and broader transportation services, saw market impact from the shifting operational outlook.
Risks and uncertainties
- The bill still requires passage by the House and the president's signature, so funding and operational outcomes are not yet final - affecting travel and airport service providers.
- Statements and executive actions could change the short-term demand dynamics that benefitted rental car companies - creating volatility for transportation and leisure stocks.