The following discussion should be read in conjunction with our Consolidated Condensed Financial Statements and accompanying Notes thereto included elsewhere herein and with our 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2009 (the "2008 Form 10-K"). Unless otherwise noted, all dollar amounts in tables are in millions and those relating to our results of operations are presented before taxes.

We operate two of the most recognized brands in the global vehicle rental industry through Avis Rent A Car System, LLC and Budget Rent A Car System, Inc. We provide car and truck rentals and ancillary services to businesses and consumers in the United States and internationally.

We operate in the following business segments:

• Domestic Car Rental- provides car rentals and ancillary products and services in the United States.

• International Car Rental- provides vehicle rentals and ancillary products and services primarily in Argentina, Australia, Canada, New Zealand, Puerto Rico and the U.S. Virgin Islands.

• Truck Rental- provides truck rentals and related services to consumers and light commercial users in the United States.

Our revenues are derived principally from car and truck rentals in our Company-owned operations and include (i) time and mileage ("T&M") fees charged to our customers for vehicle rentals, (ii) reimbursement from our customers for certain operating expenses we incur, including gasoline and vehicle licensing fees, as well as airport concession fees, which we pay in exchange for the right to operate at airports and other locations, and (iii) sales of loss damage waivers and insurance and rentals of navigation units and other items in conjunction with vehicle rentals. We also earn royalty revenue from our franchisees in conjunction with their vehicle rental transactions.

Car rental volumes are closely associated with the travel industry, particularly airline passenger volumes, or enplanements. Because we operate primarily in the United States and generate a significant portion of our revenue from our on-airport operations, we expect that our ability to generate revenue growth will be somewhat dependent on increases in domestic enplanements. We have also experienced significant per-unit fleet cost increases over the last four years, which have negatively impacted our margins. Accordingly, our ability to achieve profit margins consistent with prior periods remains dependent on our ability to successfully manage our costs and to implement changes in our pricing programs. Our vehicle rental operations are seasonal. Historically, the third quarter of the year has been our strongest quarter due to the increased level of leisure travel and household moving activity. Any occurrence that disrupts rental activity during the third quarter could have a disproportionate adverse effect on our results of operations. We have a partially variable cost structure and routinely adjust the size and, therefore, the cost of our rental fleet in response to fluctuations in demand. However, certain expenses, such as rent, are fixed and cannot be reduced in response to seasonal fluctuations in our operations.

We believe that the following factors, among others, may affect and/or have impacted our financial condition and results of operations:

• Domestic enplanements, which have declined so far in 2009 compared to 2008;

• Rising per-unit car fleet costs and changes in conditions in the used vehicle marketplace;

• Changes in the financial condition of vehicle manufacturers;

• Difficulty in achieving sustained pricing increases;

• Our expansion in off-airport or local vehicle rentals, including insurance replacement rentals;

• Increases in borrowing costs, and decreases in market appetite for, corporate and vehicle-related debt;

• Changes in foreign exchange rates; and

• Demand for truck rentals, which have been impacted by the decline in economic activity.

Many of these factors have caused our results for the nine months ended September 30, 2009 to be significantly lower than for the nine months ended September 30, 2008, excluding the 2008 impairment charge. Due to reduced demand for travel

services, rising borrowing costs and other factors, there can be no assurance that we will be able to satisfy the minimum EBITDA requirement and other covenants contained in our senior credit facilities and our asset-backed car rental conduit facilities. Failure to comply with such covenants could significantly impact our liquidity if we were unable to obtain an amendment or waiver or were unable to refinance or obtain a replacement for such facilities. The financial covenants to our senior credit facilities were amended in December 2008 and commencing with our fiscal quarter ending June 30, 2010, the requirement to maintain a quarterly minimum trailing twelve month EBITDA (as defined in our senior credit facilities) under these financial covenants will cease and be replaced by the maximum leverage ratio that was in place prior to the December 2008 amendments. There can also be no assurance that past results will be indicative of results we will achieve in 2009 or future periods. We have also been impacted by, and may be further impacted by, the recent financial market disruptions as we rely heavily on financing for our operations, particularly asset-backed financing. See "Risk Factors" set forth in Item 1A of our 2008 Form 10-K.

Discussed below are our consolidated results of operations and the results of operations for each of our reportable segments.

We measure performance using the following key operating statistics: (i) rental days, which represents the total number of days (or portion thereof) a vehicle was rented, and (ii) T&M revenue per rental day, which represents the average daily revenue we earned from rental and mileage fees charged to our customers. Our car rental operating statistics (rental days and T&M revenue per rental day) are all calculated based on the actual rental of the vehicle during a 24-hour period. We believe that this methodology, while conservative, provides our management with the most relevant statistics in order to manage the business. Our calculation may not be comparable to other companies' calculation of similarly-titled statistics.

The reportable segments presented below represent our operating segments for which separate financial information is available and is utilized on a regular basis by our chief operating decision maker to assess performance and to allocate resources. In identifying our reportable segments, we also consider the nature of services provided by our operating segments. Management evaluates the operating results of each of our reportable segments based upon revenue and "EBITDA", which we define as income from continuing operations before non-vehicle related depreciation and amortization, any impairment of goodwill, other intangible asset or equity investment, non-vehicle related interest and income taxes. Our presentation of EBITDA may not be comparable to similarly-titled measures used by other companies.

THREE MONTHS ENDED SEPTEMBER 30, 2009 VS. THREE MONTHS ENDED SEPTEMBER 30, 2008

Our consolidated results of operations comprised the following:



                                                  Three Months Ended September 30,
                                                 2009          2008            Change
  Net revenues                                $    1,465    $     1,701       $   (236 )
  Total expenses                                   1,382          2,887         (1,505 )

  Income (loss) before income taxes                   83         (1,186 )        1,269
  Provision for (benefit from) income taxes           26           (180 )          206

  Net income (loss)                           $       57    $    (1,006 )     $  1,063

During third quarter 2009, our net revenues decreased $236 million (14%) principally due to (i) a 14% decrease in T&M revenue in our car rental operations resulting primarily from a 21% decrease in car rental days, partially offset by a 9% increase in T&M revenue per day, (ii) a 15% decrease in total ancillary revenues, also resulting from decreased car rental days, and (iii) a 10% decrease in truck rental T&M revenue. In addition, the revenue decrease includes a negative impact of $14 million related to the effect of foreign currency exchange rate fluctuations on the translation of our international operations' results into U.S. dollars.

Total expenses decreased $1,505 million (52%) principally due to (i) the absence of a $1,262 million charge recorded during third quarter 2008 for the impairment of goodwill, our tradename asset and our investment in Carey Holdings, Inc. ("Carey"), (ii) a $134 million (16%) decrease in direct operating expenses largely resulting from the decrease in car rental days and reduced staffing levels, (iii) a $116 million (25%) decrease in vehicle depreciation, vehicle interest and lease charges resulting primarily from a 21% decline in our average car rental fleet and a 4% decline in per-unit fleet costs in light of increased residual values on vehicles sold in the used-vehicle market, and (iv) a $16 million (9%) decrease in selling, general and administrative expenses mainly related to reduced marketing and commission expenditures. The decrease in total expenses includes a positive impact from foreign currency exchange rates of $4 million, including our foreign exchange earnings hedges, and also reflects numerous actions taken in late 2008 and during the nine months ended September 30, 2009 to reduce non-volume-related expenses. These year-over-year expense decreases were partially offset by (i) an $18 million charge recorded in third quarter 2009 related to an adverse judgment against us in a breach-of-contract claim filed by a licensee in 2003 and (ii) a $6 million increase in interest expense on corporate debt related to the December 2008

amendments to our senior credit facilities.

As a result of these items, partially offset by a $206 million increase in our provision for income taxes, our net income increased $1,063 million.

Our effective tax rate for continuing operations was a provision of 31.3% for third quarter 2009 compared to a benefit of 15.2% for third quarter 2008. The unusually low tax rate for third quarter 2008 resulted primarily from the non-deductible portion of the impairment charge.

Following is a discussion of the results of each of our reportable segments during the three months ended September 30:

                                                           Revenues                              EBITDA
                                                                        %                                        %
                                                   2009      2008     Change         2009          2008        Change
Domestic Car Rental                               $ 1,109   $ 1,319      (16 %)    $    102      $     67          52 %
International Car Rental                              250       265       (6 )           56            60          (7 )
Truck Rental                                          106       116       (9 )           13             6         117
Corporate and Other (a)                                -          1        *            (25 )          (3 )         *

Total Company                                     $ 1,465   $ 1,701                     146           130


Less:   Non-vehicle related depreciation and
        amortization                                                                     26            23
        Interest expense related to corporate
        debt, net                                                                        37            31
        Impairment (b)                                                                   -          1,262

Income (loss) before income taxes $ 83 $ (1,186 )

(*) Not meaningful.

(a) Includes unallocated corporate overhead, the elimination of transactions between segments and an $18 million charge recorded in third quarter 2009 for an adverse litigation judgment against us for a breach-of-contract claim filed in 2003.

(b) In third quarter 2008, we recorded a charge of $1,262 million for the impairment of goodwill, our tradename asset and our investment in Carey.

Domestic Car Rental

Revenues decreased $210 million (16%) while EBITDA increased $35 million (52%) in third quarter 2009 compared with 2008. The decrease in revenues was primarily due to lower demand for car rental services, partially offset by improved pricing for car rentals. The EBITDA increase was primarily due to decreased operating expenses and lower fleet costs.

The revenue decrease of $210 million was comprised of a $156 million (15%) decrease in T&M revenue and a $54 million (18%) decrease in ancillary revenues. The decrease in T&M revenue was principally the result of a 23% decrease in rental days, partially offset by a 9% year-over-year increase in T&M revenue per day. The $54 million decrease in ancillary revenues was also primarily due to the decline in rental days and reflected (i) a $25 million decrease in gasoline sales, which was more than offset in EBITDA by $42 million of decreased gasoline expense, (ii) a $17 million decrease in GPS rentals, counter sales of insurance and other items (although revenues per transaction increased year-over-year), and (iii) a $12 million decrease in airport concession and vehicle licensing revenues, $7 million of which was offset in EBITDA by lower airport concession and vehicle licensing fees remitted to airport and other regulatory authorities.

We continued to achieve significant cost savings during the third quarter as a result of our cost savings initiatives. EBITDA reflected a $93 million (14%) decrease in operating expenses, including (i) a $63 million decrease in expenses associated with car rental volume and fleet size, primarily related to agency operator commissions, shuttling expenses, credit card fees and other items, (ii) an $18 million decrease in employee costs, rents and other expenses related primarily to reduced domestic staffing levels and the closure of unprofitable locations, and (iii) a $13 million decrease in selling, general and administration expenses related to decreases in marketing and commission expenditures, most of which are volume-related, and other items due primarily to management's actions to reduce expenditures. EBITDA also reflected $103 million (26%) of decreased fleet depreciation and lease charges resulting from the 23% decrease in the average size of our domestic rental fleet and a 5% decline in per-unit fleet costs in light of increased residual values on vehicles sold in the used-vehicle market. The decreases in expenses were slightly offset by a $5 million increase in vehicle interest expense.

International Car Rental

Revenues and EBITDA decreased $15 million (6%) and $4 million (7%), respectively, in third quarter 2009 compared with third quarter 2008, primarily due to the impact of foreign currency exchange rate movements and lower demand for car rental services.

The revenue decrease of $15 million was comprised of a $10 million (5%) decrease in car rental T&M revenue and a $5 million (6%) decrease in ancillary revenues. Virtually all of the decline in revenue was due to foreign currency exchange rates, impacting T&M revenue by $10 million and ancillary revenues by $4 million, and was partially offset in EBITDA by the opposite impact on expenses of $4 million, including our foreign exchange earnings hedges. The decrease in T&M revenue was also driven by a 9% decrease in rental days and was partially offset by a 4% increase in T&M revenue per day (9% increase excluding foreign-exchange effects). The $5 million decrease in ancillary revenues was due to the decline in rental days and reflected (i) a $3 million decrease in counter sales of insurance, GPS rentals and other items (although revenues per transaction increased year-over-year) and (ii) a $2 million decrease in gasoline sales, which was offset in EBITDA by $4 million in lower gasoline costs.

EBITDA reflected a $5 million (5%) decrease in operating expenses which related primarily to a decrease in agency operator commissions, credit card fees, maintenance and damage, vehicle licensing and other costs amid lower rental volumes, offset by (i) a $2 million increase in insurance costs and (ii) a $2 million increase in facility and management fees, and other expenses. EBITDA also benefited from $7 million (12%) of decreased fleet depreciation and lease charges, primarily reflecting a 12% decrease in the average size of our international rental fleet.

Truck Rental

Revenues decreased $10 million (9%) while EBITDA increased $7 million (117%) in third quarter 2009 compared with third quarter 2008.

The revenue decrease was primarily due to a decline of $9 million (10%) in T&M revenue, which reflected a 9% year-over-year decrease in rental days while T&M revenue per day remain virtually unchanged year-over-year. EBITDA benefited from
(i) a decline of $8 million (26%) in fleet depreciation, interest and lease charges reflecting lower per-unit fleet costs and a decrease in the average size of our truck rental fleet and (ii) a decrease of $7 million (10%) in direct operating costs primarily due to decreased employee costs and decreased operating commissions related to lower transaction volumes.

 NINE MONTHS ENDED SEPTEMBER 30, 2009 VS. NINE MONTHS ENDED SEPTEMBER 30, 2008

Our consolidated results of operations comprised the following:



                                                    Nine Months Ended September 30,
                                                   2009          2008           Change
Net revenues                                    $    3,971    $     4,723      $   (752 )
Total expenses                                       3,960          5,902        (1,942 )

Income (loss) before income taxes                       11         (1,179 )       1,190
Provision for (benefit from) for income taxes            9           (176 )         185

Net income (loss)                               $        2    $    (1,003 )    $  1,005

During the nine months ended September 30, 2009, our net revenues decreased $752 million (16%) principally due to (i) a 16% decrease in T&M revenue in our car rental operations resulting primarily from a 20% decrease in domestic and international car rental days, partially offset by a 4% increase in T&M revenue per day, (ii) a 16% decrease in ancillary revenues, also resulting from decreased car rental days, and (iii) a 9% decrease in truck rental T&M revenue. In addition, the total revenue decrease includes a negative impact of $98 million related to the effect of foreign currency exchange rate fluctuations on the translation of our international operations' results into U.S. dollars.

Total expenses decreased $1,942 million (33%) principally due to (i) the absence of a $1,262 million charge recorded during third quarter 2008 for the impairment of goodwill, our tradename asset and our investment in Carey, (ii) a $433 million (18%) decrease in direct operating expenses largely resulting from the 20% decrease in car rental days, reduced staffing levels and other cost-saving actions, (iii) $192 million (15%) lower vehicle depreciation and lease charges resulting from a 19% decline in our average car rental fleet, partially offset by a 5% increase in per-unit fleet costs, (iv) a $92 million (18%) decrease in selling, general and administrative expenses mainly related to reduced marketing and commission expenditures, and (v) $19 million (8%) lower vehicle interest expense resulting from the reduction in our average car rental fleet. The decrease in total expenses includes a positive impact from foreign currency exchange rates of $77 million, including our foreign exchange earnings hedges, and also reflects numerous actions taken in late 2008 and the nine months ended September 30, 2009 to reduce non-volume-related expenses. These year-over-year expense decreases were partially offset by (i) a $22 million increase in interest expense on corporate debt related to the December 2008 amendments to our senior credit facilities, (ii) an $18 million charge recorded in third quarter 2009 related to an adverse judgment against us in a breach-of-contract claim filed by a licensee in 2003, (iii) a $9 million increase in non-vehicle related depreciation and amortization expense and (iv) an $8 million increase in restructuring costs, primarily for severance costs tied to headcount reductions. As a result of these items, offset by a $185 million increase in our provision for income taxes, net income increased $1,005 million for the nine months ended September 30, 2009.

Our effective tax rate was a provision of 81.8% for the nine months ended September 30, 2009, which was primarily due to foreign withholding taxes and the differences in the amount of stock-based compensation recorded for book and tax purposes, and a benefit of 14.9% for the nine months ended September 30, 2008, which resulted from the non-deductible portion of the impairment charge we incurred.

Following is a discussion of the results of each of our reportable segments during the nine months ended September 30:

                                                          Revenues                              EBITDA
                                                                       %                                        %
                                                  2009      2008     Change         2009          2008        Change
Domestic Car Rental                              $ 3,100   $ 3,695      (16 %)    $    128      $    128           0 %
International Car Rental                             597       725      (18 )           93           116         (20 )
Truck Rental                                         273       300       (9 )           12             4         200
Corporate and Other (a)                                1         3        *            (36 )         (11 )         *

        Total Company                            $ 3,971   $ 4,723                     197           237


Less:   Non-vehicle related depreciation and
        amortization                                                                    71            62
        Interest expense related to corporate
        debt, net                                                                      114            92
        Impairment (b)                                                                   1         1,262

Income (loss) before income taxes $ 11 $ (1,179 )

(*) Not meaningful.

(a) Includes unallocated corporate overhead, the elimination of transactions between segments and an $18 million charge recorded in third quarter 2009 related to an adverse litigation judgment against us for a breach-of-contract claim filed in 2003.

(b) In first quarter 2009, we recorded an approximately $1 million charge for the impairment of an investment. In third quarter 2008, we recorded a charge of $1,262 million for the impairment of goodwill, our tradename asset and our investment in Carey.

Domestic Car Rental

Revenues decreased $595 million (16%) while EBITDA remained unchanged in the nine months ended September 30, 2009 compared with the same period in 2008, primarily due to decreased demand for car rental services offset by reduced costs.

The revenue decrease of $595 million was comprised of a $458 million (16%) decrease in T&M revenue and a $137 million (17%) decrease in ancillary revenues. The decrease in T&M revenue was principally the result of a 21% decrease in rental days, partially offset by a 7% year-over-year increase in T&M revenue per day. The $137 million decrease in ancillary revenues was also primarily due to the decline in rental days and reflected (i) a $72 million decrease in gasoline sales, which was more than offset in EBITDA by $105 million of decreased gasoline expense, (ii) a $37 million decrease in airport concession and vehicle licensing revenues, which was offset by $30 million lower airport concession and vehicle licensing fees remitted to airport and other regulatory authorities, and (iii) a $28 million decrease in counter sales of insurance, GPS rentals and other items (although revenues per transaction increased year-over-year).

We have aggressively reduced costs during the nine months ended September 30, 2009 in response to the sharp decline in demand. EBITDA reflected a $310 million (16%) decrease in operating expenses including (i) a $161 million decrease in maintenance and damage, agency operator commissions, shuttling, credit card fees, and other costs amid lower rental volumes, (ii) a $75 million decrease in selling, general and administrative expenses related to decreases in marketing and commission expenditures, most of which are volume-related, and other items due primarily to management's actions to reduce expenditures and (iii) a $66 million decrease in employee costs, rents and other expenses related primarily to reduced staffing levels and the closure of unprofitable locations. EBITDA also benefited from $150 million (14%) of decreased fleet depreciation and lease charges reflecting a 20% decrease in the average size of our domestic rental fleet and an 8% increase in per-unit fleet costs. The decreases in expenses were partially offset by $5 million of increased restructuring costs recorded in the nine months ended September 30, 2009 related to the Company's previously announced cost reduction initiatives.

International Car Rental

Revenues and EBITDA decreased $128 million (18%) and $23 million (20%), respectively, in the nine months ended September 30, 2009 compared with nine months ended September 30, 2008, primarily due to the impact of foreign currency exchange rate movements and lower demand for car rentals.

The revenue decrease of $128 million was comprised of a $94 million (19%) decrease in car rental T&M revenue and a $34 million (15%) decrease in ancillary revenues. The total decline in revenue includes a $98 million decrease related to foreign currency exchange rates, impacting T&M revenue by $68 million and ancillary revenues by $30 million, and was largely offset in EBITDA by the opposite impact on expenses of $77 million, including our foreign exchange earnings hedges. The decrease in T&M revenue was principally driven by an 11% decrease in T&M revenue per day, all of which is due to

movements in foreign currency exchange rates, and a 9% decrease in rental days. The $34 million decrease in ancillary revenues was due to the decline in rental days and reflected (i) a $20 million decrease in counter sales of insurance, GPS rentals and other items, (ii) an $8 million decrease in gasoline sales, which was completely offset in EBITDA by lower gasoline costs, and (iii) a $6 million decrease in airport concession and vehicle licensing revenues, which was more than offset by $16 million lower airport concession and vehicle licensing fees remitted to airport and other regulatory authorities.

. . .