Welcome to the Avis Budget Group first quarter earnings conference call. Today’s call is being recorded. At this time for opening remarks and introductions, I would like to turn the conference over to Mr. David Crowther, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Tanya. Good morning, everyone and thank you all for joining us. On the call with me are our Chairman and Chief Executive Officer, Ron Nelson; our President and Chief Operating Officer, Bob Salerno; and our Executive Vice President and Chief Financial Officer, David Wyshner. If you did not receive a copy of our press release, it’s available on our website at www.avisbudgetgroup.com. Before we discuss our results for the quarter, I would like to remind everyone that the company will be making statements about its future results, which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Statements are based on current expectations and the current economic environment and are inherently subject to significant economic, competitive, and other uncertainties, contingences beyond the control of management. You should be cautioned that these statements are not guarantees of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements. Important assumptions and other important facts that could cause actual results to differ materially than those in the forward-looking statements are specified in our 10-K and earnings release issued last night. Now I would like to turn the call over to Avis Budget Group’s Chairman and Chief Executive Officer, Ron Nelson.

Thanks, Dave and good morning to everyone. I am sure a number of companies join us today in our pleasure at being able to formally put the first quarter behind us. It was, to say the least, an unusual quarter; a period of contradictory demand indicators and a period where the negative emotions of the market didn’t really sync up with what was happening in the business. To complicate matters, we had an early Easter and a leap year thrown into the first quarter so the comparisons could be just as confusing as the underlying demand patterns. And then of course Passover and Spring Break stayed in the second quarter just so that April could be just as much of a challenge. We entered the first quarter with declines in pricing as bad as we have seen in -- but exited the quarter with competitors feverishly trying to outdo the other with price increases. We entered our quarter with our primary driver, enplanements, trending flat to down and while they generally remained that way through the quarter, rental day volume was pretty good, especially in January. Even more confusing was that leisure volume was noticeably stronger than corporate. While there may not be an agreement as to whether we are in a recession, those that believe we are universally lay it at the doorstep of the consumer, not the corporation. From an earnings standpoint, it was not our finest hour -- but then the first quarter rarely is. I can honestly say that over the last few quarters, we are growing stronger and gaining momentum. The core strategies are working and we continue to be optimistic that this will be reflected, not just over the long-term but this year as well, both in our results and in our share price.…

Thanks, Ron and good morning. Today I am going to discuss some positive trends for our company with respect to the used car market, as well as our performance excellence initiative, and finally how we see the second quarter shaping up from a demand and pricing standpoint. There seems to be a growing interest in how the used car market will affect our business and it is important to keep in mind that we are not new to this market. Although we have taken advantage of the economics of program car offerings in recent years, our fleet team is led by people who have spent decades effectively and efficiently selling cars in the secondary market. We understand the dynamics and we are innovators. In fact, we believe we were the first company to begin selling online in bulk sales, which has been a growing success. As Ron mentioned, the prices we realized on our car sales in Q1 were right where we expected them to be. We disposed of over 16,000 risk units in the quarter, principally through auctions but with 7% of our sales going through the online, direct to dealer wholesale channel we began using last year. The used car market improved in March and April, as it usually does from January and February. It is important to note that market experts, including Manheim and Odessa, have stated that the types of vehicles that we bring to auction for our own account, one-year old used cars, are outperforming the used car market as a whole. So while new car sales are declining and certain segments of the used car market are experiencing some softness, our vehicle portfolio is doing fine. Let me provide you some context on how we are doing. We compared the actual monthly cost per…

Thanks, Bob and good morning, everyone. I would like to discuss our recent results, our strong financial position, and our largely unchanged outlook for 2008. In the first quarter, revenue increased 6% to $1.44 billion, EBITDA was $31 million, and pretax income was a loss of $18 million. EBITDA declined from the $62 million we reported in first quarter 2007 due to domestic results that were impacted by mark-to-market hedge losses and weak pricing. As Ron discussed earlier, the fallen interest rates that produced the hedge loss is expected to reduce our interest expense and benefit our EBITDA in the coming quarters. In our domestic car rental operations, first quarter revenue increased 5%, reflecting a 4% increase in rental days, a 2% decrease in time and mileage revenue per day, and a 13% increase in ancillary revenues. Our rental volumes increased despite flat enplanements, largely due to our off-airport growth. Domestic EBITDA declined for the quarter as the revenue growth, increased utilization, and cost savings were offset by lower time and mileage rates per day, higher gasoline expense, and increased fleet costs. We believe the 2% decline in time and mileage rates caused by weak leisure pricing reflects typical seasonal dynamics. With the industry having more cars and less flexibility to shrink the fleet one month and then grow it the next to accommodate travel patterns, our business plan anticipated some softer pricing periods like most of Q1 would be softer than in the past, and that is what we saw. Also impacting the reported time and mileage per day rate was our 13% growth in off-airport rental days and an increase in length of rental as both of these otherwise very positive trends had a modest negative affect on our average rate per day. Fleet costs increased 3% on…

(Operator Instructions) Your first question is from Chris Agnew with Goldman Sachs. Your line is open.

Thank you. Good morning, gentlemen. First question, could you comment on what specifically caused the weakness in pricing in January and sort of reiterate why you are confident we are unlikely to see a repeat of that through the rest of this year? Thanks.

My opinion is that as this industry shifts to more and more risk units with less and less fleet flexibility, that you are going to begin to see these troughs and as the industry changes, the comps are changing and they are a little bit different. I think that’s really what it was. As you came into the season, winter seasonal places, you can see that our RPG, our pricing began to go up and what’s most impressive is that as we came out of that, pricing -- we took pricing increases, people matched us and others increased them again. So I think there is a lot of desire in the industry to move the pricing up but I do think there will be these seasonal troughs in my opinion caused by the amount of risk fleet that is around.

I would add to that -- if you [inaudible] then Hertz followed again in late April, so all of them have had pretty good adoption rates -- I mean, well beyond what you would expect given three prices increases [in two months]. So I think that combined with tightness in fleet that we see over the summer gives us some encouragement that pricing -- you know, that January was just as Bob explained, that pricing is going to tighten up over the course of [inaudible] --

Sorry, Ron, I think you might be cutting out a little bit on the phone. I’m not sure if it’s just my line. Next question is just on leisure and I guess thinking about volumes -- I mean, you had relatively strong volume growth I guess versus what data points we are seeing elsewhere in the economy. And I know you can break the leisure business up into many different segments and even geographies. Is there anything in particular that surprised you in terms of why you were seeing stronger volume growth than maybe you would have thought, just if you are looking at the broader economy and that also, as we look forward into the summer, makes you confident in your advanced reservations? Thanks.

I think -- well, you put your finger on it. It was surprising and I think what was more surprising in fact about the leisure was that a lot of it came from longer length of rental and not just -- there was transaction growth but there was a fair amount of length of rental growth that added to the number which is surprising in that that number generally doesn’t move around all that much. It is tempting to say that our volume growth was promulgated by price but if you look at the airport market share statistics, we and Hertz gave up share over the course of December, January, February and March. And so I don’t think that you can point to the numbers and say that is was just simply out-and-out a share grab. But again, I would say that what gives us encouragement about leisure pricing turning around is simply the fact that everybody -- you know, all these price increases, by the way, are leisure market increases. They don’t have anything to do with commercial pricing, so I think the fact that there’s been good adoption rates means leisure pricing [has turned around] and strengthened over the course of the [second and third quarter].

Great, and one final question just on commercial -- why was pricing weaker in the first quarter and are you getting any, when you are going in for contract renewals, what are you customers saying to you in terms of how they are thinking about their travel budgets? Thanks.

Well, on the second part first, we haven’t heard nor have we really seen any major cutbacks. Obviously there’s been a little bit of trimming here and there on the commercial travel. As far as pricing, it’s been a challenging environment in the first quarter. There are people out there looking to garner commercial business and making it challenging to increase prices. Having said that, we continue to get increases in our renewal rate, while not as robust as it’s been in the two to three range, it’s just -- it’s at right around the 2% range. And also as the leisure pricing was lower in January, you get a lot of commercial people who book on the leisure rate versus their commercial rate. We call it flipping and that has obviously a negative effect on it. As we look forward and think about pricing renewals, we continue to renew our contracts above the 98% rate that we’ve been telling you about and we continue to think we can get some lift in the pricing overall as we go forward.

Great. Thank you very much.

Our next question, Manav Patnaik with Lehman Brothers, you may ask your question.

Good morning, guys. I guess a big picture question maybe for Bob -- given your last industry experience with the car rental business, how would you gauge the economic environment obviously specific to car rental today compared with the tougher times that you’ve been through in the past? I guess with respect obviously you mentioned to some extent pricing, the used car market -- just generally speaking, how would you maybe rate this or characterize this with respect to how much harder or much of the same it is?

I will tell you when I look back at the times that we’ve been through over the last several decades, I would not say this is the toughest of economic times. I would say that from a competitive standpoint, it is a very different time in that there are -- you know, there’s recombinations in the industry and there are new competitors out there with different strategies and plans, so it is very highly competitive. As far as the economic end of it, we’ve seen it before. We do have the ability to manage a lot of our costs up and down and that’s what we’ve been doing. We are not in crisis mode at all. People are still traveling. Our numbers say so and so I think economically, we’re okay. It’s just a challenging competitive time.

Okay. I mean, I guess what I was trying to get to is I know you guys are not going to give a specific guidance. I was just curious as to do you guys have obviously your own internal numbers that you are meeting to and what does it take to provide ranges in the guidance to the investor community? Is it just because the visibility is just not there for the rest of the year and therefore you are just being prudent and holding back on giving out numbers, or because the -- I guess just the better fiscal year 2008 over 2007 sort of leaves the range open for a wide range. I just want to see if there is any way to narrow that down.

You know, we have really tried to get out of and stay out of the guidance business, at least with respect with specific numbers. And we are going to continue to try to do that. With that being said, I think we have tried to be clear about what assumptions we are making for the year and that is the 3% to 5% rental day growth in the domestic business, the modest improvement only in pricing in that business, some significant growth in truck rental EBITDA, and growth in the international segment as well. So I think we are trying to point, you know, give people our views and make sure that they are directionally right. But we really think the advantage of doing that and only that is that we can spend time on calls like this and investor meetings focused on what is going on in the business in comparison to year over year, rather than spending a lot of time talking about changes versus our initial expectations, which is obviously the risk or the pitfall associated with earnings guidance.

Fair enough and finally I guess could you just give us a quick update on the [Kerry] limo and what progress you guys are making with them?

Absolutely. The business continues to be performing generally in line with our expectations. We are seeing some economic issues in the March and April numbers there but nothing out of line with broader trends in the marketplace. I think the real issue is that strategically, the investment continues to be very attractive. The assumptions that we had going in that there could be significant cross-selling opportunities available to us is absolutely coming to bear and we are moving forward on delivering on that promise as we continue to work more and more closely with the Kerry folks and our sales force working more closely with theirs. So we are excited about the prospects and with that being said, our expectation for this year has been and continues to be that it won’t have a meaningful impact on our results, given the amount of leverage that exists on their business.

Great, thanks a lot, guys.

Our next question, William Truelove with UBS, you may ask your question.

I want to confirm something that you said on the call, just to be sure -- you said that the unit costs were going to be above your annual projections of the 4% to 6% in the second quarter, at the same time you are starting to see some price increases. Is that correct?

Yes, the issue on second quarter fleet cost increases is that we just face a difficult comp in the second quarter, combined with the seasonality of when different types of vehicles, particularly program versus risk vehicles, roll into our fleet.

Okay and the second question is about the ability to flex the fleet, given that everyone is now using more at-risk vehicles. Is it possible that we could see a lot of program cars just in the peak seasons that could produce pricing in the third quarter? That just seems to be a risk that keep thinking about, since everything depends on the peak season.

No, I really don’t think so, unless something very, very strange happens, which we don’t foresee. The ability to get seasonal cars is really moving past us and the manufacturers just aren’t making them available. Especially, if you think about it, very short-term cars at that time of the model year, the pricing they’d have to charge on it would be, even if they were going to do it would be enormous. So no, I don’t think that’s going to happen at all and I think that’s why you see troughs now where people are holding on to cars and kind of growing in anticipation of the summer. And it’s also why I think you won’t see large summer fleets.

Okay, great. Thank you.

Our next question, Christina Woo with Morgan Stanley, you may ask your question.

The first question has to do with the interest rate hedge. You reported $31 million of EBITDA, which is suggested for the hedge costs, sort of then $44 million. With your EBITDA guidance, should we look at that $31 million for the first quarter or the $44 million?

We were talking about that last night. When you are looking at year over year comparisons, how is first quarter ’08 versus first quarter ’07, we think adding it back makes sense. But when you are looking at building out the quarters for 2008 and how e think about our guidance, the negative impact in the first quarter reverses in other quarters, so it probably -- the right way to get the quarters to add up for the year is going to be to include the $13 million impact in the first quarter numbers so that --

You get all the benefit later on.

-- in future quarters, gets you to the right total. Does that make sense?

It does, I just wanted to clarify that, so thank you. The second set of questions has to do with enplanements. I’m wondering what gives you the confidence that enplanements will actually be up year over year? And if there are any leading indicators that you track.

We look at the same sorts of ATA and BTS statistics that come out, as well as what some of the airlines are saying. We saw a flat first quarter amid a significant amount of concerns about the macroeconomic environment and I think what we are looking at is the fact that it was flat, that enplanements were flat in what was thought to be a relatively weak time. And in that context, that is why we are hopeful that enplanements will turn out to be up modestly this year because the economy is expected to improve over the course of the year. On top of that, we also have the advantage of increased inbound travel. The weak dollar is making it very attractive for folks to come to the U.S. and we expect that business, which is not part of the domestic enplanement figures, to provide a boost as well.

Okay. Somewhat related to that --

You know, I would add to that -- look, I think if there is one thing that we do worry about, it’s going to be the enplanements, given what is going on with fuel prices. But I think you have to consider that it’s just -- it’s simply not that easy for airlines to take inventory out of their cycle and they are probably not going to take it out of their fleet over the course of the summer months and we have the advantage of being downstream from their more challenged ability to inventory out because what they will typically do is start to discount pricing to fill up the seats, notwithstanding whatever the fuel costs are. That tends to have an ameliorating impact on enplanements. But as David said, I think we probably would have thought going into March that enplanements for the quarter were going to be down and actually they were actually flat for the quarter. And you couldn’t get any worse consumer confidence numbers than you had in the first quarter, so I think we are watching it and we are concerned about it but as I said, that combined with the shot in the arm from the rebate checks we think might well hold up travel over the summer.

Okay. Somewhat related to that, I’m wondering if you could talk about your flexibility in your fleet purchasing. I understand that you have flexibility to de-fleet and go to market, but if enplanements were to be flat or down, what sort of flexibility do you have in fleet purchasing? What lead times do you have to put your purchase orders in?

Fleet management, as I told you the last time we talked, is really half art and while I don’t think the way we’ll go at it, if volume is softening, clearly we’ll take down future purchases but at the beginning of a model year, you want to buy as much as you can because they are the cheapest cars of the model year. The way we would manage the fleet is with deletions and our fleet plans are built for the contingency.

Okay.

The other thing you might want to look at is if you go back actually even to the early 80s and look at the FAA statistics in enplanements, when enplanements are down during periods of weak economic activity, you are talking about 4% to 5%. You are not talking about 10%, 15%, or 20% on enplanements. And fluxing the fleet 4% to 5% for us, while it’s a number, it’s not a gigantic out of the ballpark number.

That’s right, Ron, because even if we don’t change our purchases at all, a 4% change in our fleet size translates into only half a month change in our average life -- average hold period.

Okay. Great, one last question on the share buy-backs -- you had done quite a bit of the share buy-back authorization during the first quarter. Might we expect greater than the $50 million authorization or are there certain limits as to how much a buy-back your board can authorize? Thanks.

Well, I think we are always going to balance our buy-back in the context of our ratings, particularly in this environment where credit is up in the air. Our board has authorized $50 million at this juncture. We haven’t expended the full amount of the $50 million yet, so we will probably address that issue when we do exhaust the authorization that we --

Okay, thanks.

We only have time for one more question. Frank [Jarmin] with Goldman Sachs, you may ask your question.

Thanks, guys. Just a couple of questions on the ABS front -- you talked about the $1.9 billion of availability you have today. As I think about more specific items, I think you have a $600 million deal wrapped by [Fijic] and you have the $1.5 billion seasonal conduit rolling in October, which I believe is currently utilized by some of your ’08 term maturities. Can you just provide me a little more color on how you guys see these two events unfolding over the course of the this year?

Sure. With respect to the conduit that rolls in October, our plan and our expectation is that we would roll the conduit at that point in time. Based on the discussions we’ve had with the conduit lenders, we do expect the cost in terms of the spread to LIBOR that we pay will increase upon the renewal there, but we don’t anticipate any issues with respect to the renewal and continuation of that funding, other than the increase in costs to reflect the current pricing of risk. With respect to [Fijic] wrapped and other mono-line wrapped paper, we continue to look at that and are actively exploring opportunities that we have to mitigate any risks that we see associated with that. We’re just not in a position to talk more about the details there at this point in time.

Okay and then on the $300 million lease deal, can you give me a sense for what the pricing looked like on that particular deal?

Sure. We expect the all-in pricing on that to be less than 6%.

Okay. That’s all I had. Thanks.

For closing remarks, the call is being turned back over to Mr. Ronald Nelson. Please go ahead, sir.

Thank you. I want to thank you all for joining us today. If you’ve gotten a sense of cautious optimism from our discussion today, it is because we are satisfied with our current results and prospects, but only in the context of the environment that we are operating in. In an absolute sense, we still have a way to go. Our longer term margin target of 9% remains intact, as does our long-term growth rate range of 8% to 12% annually. Our core strategies are all aimed at these targets and remain very much on track. We think we are achieving success in creating new sources of revenue, optimizing our two strong brands, and capitalizing on profit opportunities. The performance excellence process improvement initiative is delivering both cost savings and consumer benefits. We are continuing to grow high margin GPS and other ancillary revenues. We are getting growth in our Affinity relationships. All of this, combined with our ability to generate free cash flow, will contribute meaningfully in 2008. In addition, our deep and experienced management team has a track record of having grown this business through all types of economic environments. So thanks for joining today and I look forward to talking to all of you during the quarter or on our next call.

This concludes today’s conference. You may disconnect.