The Takeoff Episode 03: Why Team and Culture Matter for Travel Startups Sponsored This content is created collaboratively with one of our sponsors.
FlightCar likens itself to other sharing economy companies by arguing that there are no regulations for its new business model. But it really isn’t complicated at all: It is a business, and there are rules about businesses operating at airports.
Innovative startups will always run smack into dissension from existing companies and old regulations. But there’s a difference between creating a new market and cheating the system, and FlightCar is walking a thin line.
On June 7, the San Francisco city attorney’s office filed a lawsuit against the airport car rental and parking service on behalf of San Francisco Airport for continued violation of the airports’ cease and desist letters.
The startup launched at SFO in March 2013, but quickly moved to a lot four miles away from the airport after receiving a cease and desist order for operating at the airport without a permit.
The startup continued to resist airport regulations, which require off-airport car rental agencies to pay the airport 10 percent of gross profits and a $20 transportation fee for each rental car transaction; fees currently paid by SFO’s more traditional off-airport car rental companies including Advantage, Airport Van Rental, and Pay Less.
FlightCar argues it does not need a Commercial Ground Transportation Permit given its unique business model, which it describes as a “peer-to-peer and business-driven sharing-economy company.”
FlightCar’s business model allows travelers to drop off cars at its lot and then receive either free parking or $10 in gas cards for each day the car is rented out to an incoming visitor. Rentals are 30 to 50 percent cheaper than traditional companies.
After setting up an off-airport lot, the startup turned to third-party limousine services to transport flyers to and from the airport, and says the airport and city make money every time it acts as a concierge service organizing airport pickups.
In a statement sent to media, FlightCar writes it is “under attack by City and Airport officials in San Francisco.” The statement continues:
In fact, the recent injunction is really about a disagreement about whether the current rules for off- airport car rental and parking served by Airport shuttles should apply to FlightCar, which operates under an entirely different business model, but offers consumers the same or better level of service, thanks to its model of sharing.
The airport’s grievances expand beyond FlightCar’s lack of permit to include where it picks up and drops off passengers. Highlights from the lawsuit [embedded below] are as follows:
- FlightCar currently picks up and drops off passengers directly at the terminal using a third-party limousine service in violation of SFO’s requirement that all rental car companies transport customers to terminals via AirTrain.
- FlightCar currently operates without an off-airport rental car business permit that would give SFO access to 10 percent of FlightCar’s gross profits and $20 transportation fee for each rental car transaction.
The lawsuit also points out that FlightCar’s advertising “emphasizes its association with SFO and highlights its low rental rates.” One billboard ad touts FlightCar’s free parking.
FlightCar has backed away from calling itself an airport rental car company and said in a message to Skift, “It’s very important to note that FlightCar gets its car-sharing customers from sources other than the airport, meaning we are marketing ourselves to appeal to people who use the train, public transport or other means.”
It also seems obvious to note that a reference to airport transportation is in the company’s name.
FlightCar and SFO
FlightCar’s official statement says the startup has “been working with [the] Airport since February” and is “open to negotiating new appropriate fee structures;” however, Doug Yakel of SFO tells Skift that the airport is “in no current discussions with FlightCar.”
Skift previously highlighted the airport’s openness to innovation as well as a proceeding underway within the California Public Utilities Commission that could open the airport’s doors to alternative transportation options and ride-share startups in August.
Yakel; however, draws a clear line between innovation and cheating. He says, “We are open to new business models. That’s a true statement. We are not open to it if it creates an unfair advantage to that company.”
FlightCar and Boston’s non-existent relationship
FlightCar launched near Boston’s Logan Airport on May 23, three months after its San Francisco debut.
Skift reached out to Boston Logan Airport to inquire about their relationship with FlightCar, but its media representative had never heard of the startup and later responded with the following statement:
Massport does not have an operating agreement with the company and therefore we cannot ascertain if they provide the levels of safety, security and customer service that we expect from companies that do business at Logan Airport. We are aware of the suit brought by San Francisco Airport and will follow it closely.
Other off-airport car rental agencies that operate at Logan Airport with contractual agreements are required to pay the airport 10 percent of their gross revenue.
Richard Walsh, Asst. Director of Strategic Communications and Marketing at Logan Airport, said one example of what the contributions go towards is the construction of Boston’s new convention center.
He says the airport would require an operating agreement with anyone who does business at the airport, a category that FlightCar doesn’t believe it belongs in.
“Our business is completely independent from Boston Logan,” writes Zaparde in an email to Skift. “So, Boston Logan and the City collect income from FlightCar every time FlightCar acts as the concierge to arrange for a local car service to pick up/drop off someone, of course, only in the instances the car service goes to the airport, which is not always the case.”
This most recent statement again highlights the company’s shift away from considering itself an airport car rental company. In a May 22nd blog post announcing the Boston launch, Streetwise’s BostInno blog writes, ” Zaparde is also quick to note they won’t be going beyond airports.”
Soon, FlightCar might not have any choice.
Below if the full legal complaint filed by SFO against FlightCar: