Good morning and welcome to the Avis Budget Group second quarter earnings conference call. 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.

Good morning everyone and thank you all for joining us. On the call with me today are our Chairman and Chief Executive Officer, Ronald Nelson; our President and Chief Operating Officer, Robert 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. Such statements are based on current expectations and the current economic environment and are inherently subject to significant economic, competitive, and other uncertainties and 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 factors that could cause actual results to differ materially than those in the forward-looking statements are specified in our 10-K and the earnings release issued last night. Now I would like to turn the call over to Avis Budget Group’s Chairman and Chief Executive Officer, Ronald Nelson.

Thanks David and good morning to everyone. It’s been a fairly tumultuous quarter to say the least and this morning we’re going to try and focus our discussion not only on the quarter’s results but on the issues that seem to swirling in the haze of the current macroeconomic environment. Needless to say we’re always disappointed when we report down earnings, especially when our forecast was for growth. But given the headwinds brought on by oil prices specifically and there follow-on affect on airlines, OEMs, and consumers, we do think our business model demonstrated its resilience in a difficult time. Much of the impact of these headwinds was out of our control, notably declines in commercial travel volumes and in car rental industry pricing. These issues overwhelmed at least in the second quarter, significant benefits we’ve realized from executing our strategy. Our progress on that front has been substantial and successful in developing incremental distribution channels, we’ve won new customer accounts, we’ve grown our ancillary and off-airport revenues, and we’ve adjusted the size and composition of our fleet and we’re generating millions in savings from our process improvements through our Performance Excellence initiatives. Unfortunately all of this seems, at least temporarily to being lost in the strong currents of an economic downturn. So while we continue to see many signs of progress, innovation, improved efficiency, and positive efforts that to me, offer reassurance that we are positioned to achieve success over the long-term, its probably more important at this juncture to discuss what we’ve seen in recent months, what has changed since our last call, what hasn’t changed, and what we’re doing about it. That’s what all of us are going to use your time for today. I’m going to address the current environment; Robert will provide some specifics related…

Thanks Ronald and good morning. Today I’m going to discuss the trends we are seeing in the used car market, provide an update on our model year 2009 fleet negotiations, and describe what we’re doing to respond to the challenging conditions facing us. As Ronald mentioned, the prices we realized on used cars in Q2, were where we expected them to be, and perhaps a bit better. We sold more than 33,000 risk units in the quarter principally through traditional wholesale auctions. We are also continuing to see significant growth in our direct to dealer wholesale ecommerce channels; Open Lane, Smart Auction, and Manheim OVE. In fact during the quarter, nearly 10% of our sales came through these channels. More importantly we had good experience across all the channels. To monitor this we compare the actual monthly cost per car on the risk units we sold, to what our expectations were when we purchased these cars in the range of 12 to 16 months ago. In the second quarter our actual depreciation costs on model year 2007 vehicles were within 3% of our initial expectations. In fact, through depreciation as measured after the sale came in at about $7 per car a month less than our original assessment. For those who look at the headline numbers regarding used vehicle prices, our favorable results may be surprising. For those who look at components of the used car market and understand our risk vehicle strategy, I think our results are actually to be expected for two principal reasons. First, as we have mentioned on the last several calls, we and others in our industry are holding cars somewhat longer then we did in the past. Therefore, while the average number of vehicles operated by rental companies has remained relatively unchanged, Manheim reports…

Thanks Robert and good morning everyone. I’d like to discuss our recent results, our liquidity and debt covenants, free cash flow and our update outlook for 2008. In the second quarter revenue increased 4% to $1.6 billion, EBITDA was $77 million and pre-tax income was $25 million. EBITDA declined from the $87 million we reported in second quarter 2007 due to domestic results that were impacted by increased fleet costs, higher gasoline costs, and lower pricing. In our domestic car rental operations second quarter revenue increased 4%, reflecting a 3% increase in rental days, slightly lower time and mileage revenue per day and a 13% increase in ancillary revenues. Rental volumes increased despite a decline in enplanements largely due to our gross off-airport where rental days increased 9%. On-airport rental days were flat with commercial volumes down slightly and leisure volumes increasing a bit. The data we have seen so far indicates that our volumes were in line with market trends, most notably a decline in domestic enplanements and weak commercial travel volumes. Domestic EBITDA for the quarter benefited from the volume growth from increased ancillary revenues and from cost savings from process improvement and favorable self insurance experience. But the benefits of growth and productivity were fully offset by slightly lower time and mileage rates per day and inflationary pressures impacting gasoline, wage and fleet costs. Even with significant progress in reducing non-fleet expenses, it is difficult for us to grow our earnings when pricing is declining year-over-year. Domestic fleet costs increased 9% on a per-unit basis, primarily due to timing issues as Robert discussed, but are up only 6% on a year-to-date basis in line with our expectations of 4% to 6% growth in per-unit fleet costs this year. Our direct operating expenses decreased by 30 basis points…

(Operator Instructions) Your first question comes from the line of Chris Agnew - Goldman Sachs

On the timing of your free cash flow through the rest of this year, should we expect the seasonal pattern that we saw last year which is cash flow generated in the third quarter and then cash outflow in the fourth? Also is there—can you give us any indication of changes in the collateral requirements on potential renewal of your conduit facilities and then you talked about reducing the fleet values going into next year, is that just the reduction in the number of vehicles or is there another element such as a reduction in vehicle values and if you could quantify that.

With respect to the timing of cash flow I think the seasonal pattern is fairly typical. The third quarter generally tends to be our strongest cash flow quarter and the only issue that may bounce around a bit this year is the timing related to vehicle programs where as you can see, our cash flows have actually been very strong in the first half of the year. But excluding the vehicle component I would expect our cash flows to be stronger in the third quarter and into October. With respect to collateral requirements, we are not seeing any significant changes in how the rating agencies are looking at our fleet and at our asset-backed structures. So that remains pretty much the same. And then with respect to fleet values or carrying amounts, I think the only changes there are the normal seasonal changes in the fleet where our fleet will definitely be smaller at the end of the third quarter then it is currently and then again smaller at the end of the fourth quarter due to the seasonal demand patterns that we face and also reflected in that would be any changes in the market environment as well. We expect to continue to move fleet in our car rental business to match up with demand.

Can you comment on what the collateral requirements on the conduit facilities that you’re looking to renew, what they are currently if there’s not going to be any change?

Typically the credit enhancement requirements are in the low to mid 30s which allows us to generate an advance rate on the vehicles or loan to value rate north of 70%.

And so because there’s no change, there shouldn’t be any incremental cash drawdown or usage?

That’s correct.

Just a clarification, in your previous guidance you talked about performance excellence and other initiatives to exceed $40 million and you’re repeating that today, but you’ve stepped up your cost actions, more aggressive cost actions, am I right in thinking that those more aggressive cost actions are really to offset inflationary pressures that have increased through this year or is there any implication in there that your performance excellence initiatives are a little bit disappointing versus where you’d hoped you’d be?

Performance excellence is absolutely not disappointing at all. It is meeting and exceeding our expectations. We’re going to generate $40 million or more from performance excellence alone and the other cost savings that we’re referring to, some of them are projects we had in mind early in the year and others are ones that we’ve developed and accelerated in light of the market environment. Performance excellence is doing everything we expected it to and we’re very excited about what its doing and how it’s doing it in our business. The additional cost savings that we’re working on have really been a response more to the market environment then anything else.

Your next question comes from the line of William Truelove - UBS William Truelove – UBS: I was just wondering about thinking about the differences between the same store fleet size in terms of how we’re going to track the fleet versus the growth as you move more off-airport, so what’s sort of the net affect of the average year-over-year change in vehicle during the period? Is it still going to continue to increase because you’re growing off fleet or how we should we think about that on a net basis?

As we grow our off-airport, we do track what’s the fleet off-airport and on-airport and we attempt to regulate the size of the fleet for both ends of this business. And so as we talked about today, our off-airport business has been growing rather well and we continue to move cars out there. And on our on-airport business given some of the things that have been going on, it’s been rather stagnant. So we’re fronting the total fleet across both segments. I think if you look at the total volume that’s in there and the projections that we’ve given you for volume, you could pretty much peg where the fleet is going. William Truelove – UBS: In terms of the increase in truck fleet size, I was a tad surprised to see it tick up in the second quarter given the continued difficulty in the housing market; can you talk a little bit about what’s going on in the truck division?

I think the uptick you’ve seen really has to do with a different kind of truck we’ve put in there; we’ve added some cargo vans to the mix that we think are applicable not only in the truck business but in our car business. In addition to that we’ve opened quite a few stores with public storage and some of our fleet has gone out that way. But the real uptick in the fleet has just been a change in mix to some smaller cargo vans.

Your final question comes from the line of Michael Millman – Millman Research Michael Millman – Millman Research: Regarding the performance excellence and other cost, can you talk about what kind of flexibility you have in putting that money back into the company versus putting that money into the bottom line?

With respect to our performance excellence savings, we expect that to drop through to the bottom line. It is real savings and it’s all dropping through. We look at this as what are we bringing to the bottom line, we’re not looking to count some of it here and then push it back in somewhere else. This is real savings that’s hitting the bottom line dollar for dollar.

I do think though you have to consider that we will have wage increases over the course of the year and we are seeing some pressure from higher airport commissions, higher partner commissions that will tend to offset some of the $40 million but in terms of—in a static environment the $40 million will drop right through to the bottom line but our hope is that we’re going to more than offset other increases. Michael Millman – Millman Research: Taking into account the realities of inflation--

Well I think you’re right, we have a $3 billion cost base independent of fleet and there are, you’re right, there are realities of inflation but I think that if you look over the last three years, we’ve been fairly good at increasing the productivity of our field operating staff and I think we’ve held the inflation down to less then a percent, so its always difficult to prove those savings in an inflationary environment but they do exist and we’re feeling very good about what we’re doing on performance excellence. Michael Millman – Millman Research: You comment about basically that mileage is a major determinant of the price and you might have to look at long driving rentals in the negative way, if indeed on some weekend pricing you increase pricing to restrict that, can you live with that? Does that hurt your image for other business you’d like to do? That’s a yield management question, how efficient is it?

Well I don’t think anything we’ve said in this area is absolute. I don’t think we’re getting out of the weekend business. A lot of weekend business is very good and very profitable. However as we slice and dice it and look at mileage consumption, there are some bits in places—it’s a weekend business and certain places where we want to change it. How we change it is what we’re going through now. One way is with pricing. One way is with mileage restrictions and we’re looking at that. I think what we were trying to let on, was that there’s been a belief here, a growing belief that as we have 50% of our fleet at risk, you can’t just consider the time you hold the car as we used to with [term-backed] vehicles that the real depreciation of the car happens a lot with the miles accredited. And so weekends are one place. There are other places we are looking at how the miles come on to the cars. We’re not looking to change our image at all. We’re not looking to drop or completely cut out any bits of business. This is more rifle shot or surgical then broad based. Michael Millman – Millman Research: Your theory that if enplanements are down or that capacity is down there might be a pick up in certain secondary markets in car rental, how is that playing out in Hawaii which I guess is the leader in capacity reductions?

Well I think Hawaii is a little bit different. It’s a little difficult to drive from a tertiary market in Hawaii to another one, there’s water involved. I think this will play out more as we get into the fourth quarter domestically where you can drive and I’m sure you’ve looked at the same statistics we have on what’s going to go on in the fourth quarter, which airports are going to be losing service and what’s going to happen and so as you think about those airports and the ability to drive to a larger airport, that’s what we believe. That’s a supposition, it’s yet to be proved out and we’ll see what happens as the fourth quarter comes. Michael Millman – Millman Research: On a pricing basis, if you can give us a feel for how pricing is by different cars, depreciation I guess bottom line, return on individual cars.

I don’t think we cut it that granularly. Clearly we price the cars in a competitive marketplace and it has really little to do with what they cost and the like. If you look at the current environment it’s hard to even rent an SUV at this environment but SUVs probably cost two or three times as much as the small compact cars that we have that we can rent all day long for increasing prices. So it’s a little hard to generalize it. I think it is a marketplace type of event. Let me just conclude by thanking you all for joining us today. Under the circumstances pessimism in the marketplace and negativity in the media is a normal reaction. It’s not really surprising. Even in the best of times the good news often gets lost amid the focus of what’s going on in the world. In our case it’s easy to overlook many of the positives that our dedicated employees and experienced management team continue to deliver on each and every day. It’s true we are experiencing headwinds from the macroeconomic environment but its really no different then anyone else. We’re meeting it head on, our flexible business model is performing as it should and we’re doing the things one would expect from a management team in these economic times. Our outlook for the third quarter is reasonably favorable. For the fourth quarter it’s uncertain, but for the long-term it’s optimistic. We expect to be well positioned for this as we aim to continue to lower our cost base, we rollout new products and services, and continue to execute against our key strategic objectives. We look forward to talking to you next quarter. Thanks again.