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Hertz, the ubiquitous rental car company that’s a fixture of airports all over the world, filed for bankruptcy protection on Friday, citing a severe decline in business thanks to the COVID-19 pandemic and the economic downturn that it caused.
The Florida-based company announced it would seek Chapter 11 bankruptcy protection on Friday, seeking to not go out of business entirely but to reorganize. It will continue to do business in the interim, using $1 billion in cash on hand to honor bookings, vouchers and more.
CNN called the move arguably the highest-profile bankruptcy of the COVID-19 crisis to date. The cause is fairly obvious: right now people aren’t traveling, aren’t flying and aren’t renting cars. As that story notes, Hertz has already laid off 12,000 employees, and its shares are down 82 percent this year.
“The impact of COVID-19 on travel demand was sudden and dramatic, causing an abrupt decline in the company’s revenue and future bookings,” the company said in a statement. “Hertz took immediate actions to prioritize the health and safety of employees and customers, eliminate all non-essential spending and preserve liquidity. However, uncertainty remains as to when revenue will return and when the used-car market will fully re-open for sales, which necessitated today’s action.”
Hertz joins several other high-profile retail companies hammered into bankruptcy by the current situation, including J.C. Penney, J. Crew and Neiman Marcus. The 102-year-old company has survived through the Great Depression, World War II and the Oil Crisis, but it was no match for this pandemic.
Having said that, Hertz and other rental car companies were having difficulty even before the outbreak. They faced stiff competition in recent years from Uber and Lyft, with travelers opting for ride-hailing services rather than splurging for rental cars (and their sometimes costly fees and liabilities.)
Last year Fortune reported some 56 percent of customers surveyed by a marketing firm had stopped renting cars entirely; at Los Angeles International Airport, car rentals peaked way back in 2016. Hertz and other companies aren’t equipped for a situation where customers largely stopped flying and renting cars en masse. In Hertz’s case, it’s also $19 billion in debt—the majority of that for its more than 500,000 vehicles—and it posted a $58 million net loss last year. Even if Hertz successfully reorganizes, it has a lot to contend with, and given the current situation, we could expect similar bad news soon from companies like Avis and Enterprise.
On the bright side, you can still pick up one of those Hertz Corvette Z06s and Camaro ZL1s on the cheap. And those beat dealing with airports any day of the week.
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