
Who is the Villain in this Disruption Story? - sebg
http://priceonomics.com/who-is-the-villain-in-this-disruption-story/
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mchannon
I always understood the reason for rental cars costing so much on-airport was
to pay for the high-density construction on prime real estate to accommodate
them within a reasonable hike of the airport gates. SFO's train system (10
minutes to the rental car center!) cost a lot to build and costs a lot to
maintain, so it's fair for brand name rental agencies to shoulder that cost.

FlightCar, and to a lesser extent the other off-airport rental companies (who
still run shuttles from the rental car center), don't burden the airport with
space in the multistory garage on the airport property. As such, they
shouldn't be subject to taxation by the airport.

SFO's an interesting case because it exists completely beyond the boundaries
of the city and county of San Francisco, with FlightCar's property even
further afield in Burlingame. I fail to see how they could even have standing.

~~~
Patrick_Devine
They do burden the airport to some degree though. The airport allows off-
airport rental agencies to drive their giant billboard buses onto the
premises, and also provides a curbside for them to load and unload passengers.

Clearly FlightCar doesn't burden an airport in the same way, however they do
to some extent. Maybe if the airport worked with them and provided some
portion of short term parking for their customers for a cut of the price it
could be beneficial to both parties?

~~~
pogo
The degree of "burden" that FlightCar imposes on SFO is irrelevant to SFO's
ability to charge a fee to FlightCar. SFO owns a platform and nobody is
entitled to use it without paying, even if such use costs SFO nothing. (Which
is not the case here, since FlightCar rentals are displacing car rentals that
would otherwise pay a fee to SFO.)

~~~
toomuchtodo
Can you explain to me how SFO can prohibit FlightCar from picking up or
dropping off passengers at SFO anymore than they can prohibit my friend from
dropping me off or picking me up there? Since when you prohibit someone from
the roads at a public facility when they're conforming to the law?

~~~
pogo
FlightCar is a business that uses another entity's property and services
without permission and for profit,but without remuneration. This is not at all
comparable to a private individual doing a friend a favor for free. I would
imagine that the airport would start with a cease-and-desist letter, perhaps
along with an offer to come to to some sort of revenue-sharing agreement for
continued access. Failing a voluntary resolution, a lawsuit might follow.

To address your last point, let's use another example. Football stadiums are
public facilities often owned by local municipalities. But that doesn't mean I
can go in and start selling hot dogs.

~~~
toomuchtodo
But you can deliver hot dogs to stadium patrons on public roadways at the
stadium. The airport can C&D all it wants. Fine. Cat and mouse. FlightCar will
simply match the letter of the law. Good luck.

Disclaimer: I have had pizza delivered right up to Solider Field in Chicago
before a game. Using a public road.

~~~
zanny
Are the roads _inside_ an airport still public? I imagine they aren't, even
the airport is publicly owned, the roads inside the airport complex fall under
the airports jurisdiction in the same way a business compounds front gate
marks the end of public road presence.

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lovemenot
Disruption is not a TV drama. That there is no obvious villain, is not an
argument in support of the status quo. The issue is inefficiency. Why take two
cars into the airport when I can just fly-and-go? The inefficiency of storing
empty vehicles for longish periods of time increases costs on market
participants and on the public. How the burden of disruption will be
distributed amongst incumbents and new players is surely an important
question. But the article appears not to care that efficiency improvements may
be held hostage to such negotiations. Conflating whether to allow FlightCar
with how best to allow FlightCar and its ilk.

~~~
jljljl
The efficiency argument actually has very little to do with the story. I doubt
anyone (including the airport) disputes the benefit of increased ride sharing.

The point is that FlightCar is offering the same or competing services as an
Airport rental car agency without paying the same use fees as a rental car
agency. This has less to do with efficiency and more to do with them
exploiting loopholes to avoid paying the same costs as more established rental
companies. They benefit from the increased rental demand, cab stands, and
private roads produced by the airport, but don't pay for it.

If their entire business model is dependent on not paying the airport fees,
it's probably not as disruptive as they claim.

~~~
lovemenot
I am not familiar with this story in detail. Yet on the face of it, these
services are not directly equivalent. Without knowing details of their
implementation, it is clear that in principle, FlightCar has the potential to
be disruptive, by the usual definition of the term. This is because it
utilises assets more efficiently: land, labour and vehicles. The airport's
existing financial arrangement is not really relevant since FlightCar could,
presumably with some operational difficulty, operate outside of the boundaries
of the airport. What you see as a loophole, I view as an indicator of a
business model which became broken by technology and a trend toward more
responsible use of scarce resources. You may not like it, and public opinion
may even be with you, but I don't see how this is not classic disruption.

~~~
jljljl
I actually agree with you. They could operate completely outside the
boundaries of the airport, in which case they would not have to pay the use
fees to the airport.

The problem is that part of their value prop to customers is that they offer
airport pickup (they send a black car to bring you from the airport to the
rental agency). This puts them in a position where the airport has a right to
demand use fees, since they are using the same roads and infrastructure as any
other rental car service.

Reducing costs by not using the infrastructure, and therefore completely
circumventing the need to pay the use fees, would be disruptive. Using the
infrastructure but refusing to pay is not disruption. They are not doing
anything more efficiently, they are just refusing to pay.

This issue should be understood as completely distinct from their core car-
sharing business model, which _is_ disruptive to the rental car industry.

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JonFish85
Couldn't you replace the word "Airports" with pretty much any other business?

[Entertainment companies] are less fearing change than trying to maintain
their funding system.

[Cell phone companies] are less fearing change than trying to maintain their
funding system.

[Game companies] are less fearing change than trying to maintain their funding
system.

Isn't that what holds back a lot of companies--why change if they're making
enough money as it is. In some ways, I feel like that's the big thing that
held Sony back and let Apple dominate the MP3 player market.

EDIT: This is just a comment on the headline, not anything in the article --
just to be clear!

~~~
lhc-
You can, but the difference is that those are all private companies, so if
they have to find new funding, its their own responsibility to do so or fail.
Airports are part of our public transportation infrastructure, and any new
source of funding they find will result in higher costs for everyone except
FlightCar users, because all the costs from rental companies will get spread
out elsewhere. A public company like that has much different pressures (for
example, they likely would not be allowed to fail if they have trouble finding
a revenue source people like, and can always fall back to taxes) than a
private company which is on its own.

~~~
macspoofing
>Airports are part of our public transportation infrastructure, and any new
source of funding they find will result in higher costs for everyone except
FlightCar users, because all the costs from rental companies will get spread
out elsewhere

Alright, pass those costs on. What's the alternative? We live with a less
efficient system because we're used to car renters subsidizing everyone else?

~~~
jljljl
>>Alright, pass those costs on.

It seems rather silly and inefficient that people have to pay more for their
airport coffee or airplane tickets just because rental car companies decide
stop paying their fees.

>> What's the alternative? We live with a less efficient system because we're
used to car renters subsidizing everyone else?

Car renters aren't "subsidizing" everyone else. The article makes clear that
rentals are just one of a variety of revenue sources for airports. Looked at
another way: why should public transit riders pay for the infrastructure to
support rental car agencies and shuttles?

Also, assuming FlightCar is truly disruptive, they should be able to provide a
more efficient and cost-effective service despite paying the airports an
appropriate use fee.

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joshdance
"Regardless, if FlightCar does succeed in disrupting the rental business at
airports, then the money that airports once derived from rental companies will
need to be replaced. Nationwide, car rental fees account for about 14% of
airports’ revenues - a figure that is higher in small airports with less
retail and ground transportation options. SFO took in $94 million from car
rentals in the last fiscal year."

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DanielBMarkham
_"...Unlike the story of ride sharing apps and the taxi industry, this story
doesn't seem to have an easy villain..."_

I'm getting lost in the premise here. Does every story of disruption have to
have a hero and a villain? This seems to be a rule of how these things work in
the author's eyes? Why the heck is that?

I own a car. I park the car. If I allow other people to use the car, the
location the car is parked has nothing to do with anything. If it did, would
we start allowing different fees depending on where my car was when I loaned
it to somebody? That's crazy.

There's not a villain. There's a broken revenue model for airports that
doesn't work anymore. That's good -- things keep changing and we wouldn't
expect everything to remain stable forever. Airports need to change like
everything else. Creative change that gives us all more of what we want more
efficiently is a good thing. We need lots more of it. It doesn't have to fit
into a good-guy/bad-guy narrative.

Like I said, I have no idea what the point the author is trying to make here.

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hardtke
Keep in mind that many localities utilize car rental taxes at airports to
subsidize public bonds unrelated to the airport. This a particularly good way
of paying for publicly financed stadiums. Airport Car rental taxes are popular
with local voters because they don't actually tax local voters. Hotel taxes
are also popular for this reason.

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vitd
I was thinking about this business from a traveler’s point of view. If I drop
my car off and it has a built-in GPS, doesn’t that just give the renter a map
to an empty house to rob? I realize not all cars have built-in GPSs yet, but
it won’t be long before they all do.

~~~
zanny
You can find someones house without needing their cars GPS. If Flightcar lists
a persons name anywhere, you know then if they are on a flight and probably
not at home.

Though it could make sense to recommend wiping your gps before loaning your
car if it does keep a memory of recent trips.

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mikeash
I can't feel sympathetic at all to the idea that this car rental company
should somehow avoid these fees.

This is not a story of potentially overbearing or obsolete regulation such as
that faced by companies like Uber and Airbnb. This is simply a property owner
controlling activity _on their own property_. The fact that airports are
usually owned my governments is completely incidental here. You'd no doubt
find the same sort of fees at a privately-owned airport. If you want to do
business on somebody else's property, you play by the owner's rules, end of
story.

~~~
redthrowaway
Yeah, I think this is a great idea, but they should pay the damned airport
fees. They derive exactly the same benefits from the airports being there that
traditional car rental companies do, so they should shut up and pay the piper.

~~~
gojomo
Actually, they don't derive the same benefits. They have no cars or counter
on-site.

Also, it's likely a majority of their drop-offs and pick-ups _aren 't even
people renting cars_! Instead, they're locals, who've dropped off their car at
a remote lot for _maybe_ -renting. Why should such a person be routed out
through the remote rental-counter-center, when they're not a car-renter?
They're most like any other local arriving via cab or limo, so that's the
airport-usage-fee that should apply.

------
gojomo
SFO should charge based on actual passenger or vehicle impact, not business
model. Charge every dropoff or pickup equally, if need be.

~~~
zanny
How do you charge people to stop at the terminal without severely crippling an
already saturated people drop off / pick up pipeline?

What would probably work better is a toll ticket just to enter the airport
complex via the main gate. Airports (almost always) have front gates to lock
the entire compound if necessary, add a toll booth.

~~~
gojomo
You answered your own question.

The visit toll could be collected electronically, via transponder or a bill
mailed to the car's registered owner, to require no slowing or stopping of
traffic.

They could also allow free or cheaper visits at the far end of the SFO
'airtram' (where the existing rental car center is located).... the
differential could even vary with congestion.

If they want to throw a bone to occasional, casual flyers and friends on
pickup/dropoff duty, let each license plate have 1 free visit each N days.
(Though, the logic and fairness of charging every visit equally based on its
congestion impact is strong.)

There are better ways to meet any legitimate concerns of SFO than to force new
services into the old rental-agency cookie-mold.

~~~
mikeash
SFO's "legitimate concerns" are that they can control activity on their
property. If they want to charge rental car companies extra, that's their
right. This isn't society-wide regulation, it's a business entity (one that
happens to be owned by a government) deciding what to do with their own
property.

~~~
gojomo
A regular business could not issue the tickets SFO is issuing. A regular
business would also be subject to additional antitrust and fair-business-
practice constraints.

So if you're suggesting the airport be privatized, and then offering services
like any other "business entity… deciding what to do with its own property", I
think that'd be a great plan.

But SFO is a public entity, using state power to enforce extra monopoly
privileges. It doesn't get to just say "because we want to do it this way with
'our' property", even if it's silly. It's the city of San Francisco's
property, and their actions should be serving the public interest.

An equitable regime of charging based on actual visit impact achieves that. On
the other hand, enforcing the old formulas out of tradition is lazy and
destructive - and suspiciously protective of SFO's longtime partners among the
incumbent rental agencies.

~~~
zanny
> and their actions should be serving the public interest.

We still have state owned toll roads across the country. There is an
established habit of limiting road traffic via tolling even on public roads.

~~~
gojomo
Exactly! As proposed upthread, the airport should charge a toll per visit
based on impact, not based on old business model patterns.

Toll roads (state owned or private) charge by use, which is fairly reasonable
and efficient, not by a deep inspection of your gross revenues.

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robryan
The key point I think here is the transportation of people from the airport to
the car lot. An airport should absolutely be able to put a fee on this. If
customers were able to make their own way to an offsite lot I don't see what
the grounds for a fee would be though.

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sebg
Key paragraphs =>

"This week, Forbes reports that “Airports are the next big battleground in the
sharing economy” as the startup FlightCar, which competes with the car rental
industry at airports, faces a legal challenge.

The city and county of San Francisco has sued FlightCar for running a rental
car company without certification from the airport. "

