2013-06-11

Co.Exist

FlightCar: The Latest Sharing Site In Legal Limbo

Making some cash by renting your car to a stranger while you go on a trip instead of leaving it at the airport probably sounds like a good deal to you. It doesn’t to the car rental companies at airports.

Not everyone wants to share in the sharing economy. New York has been giving Airbnb a heap of problems. And now another sharing start-up is facing legal issues.

We wrote about FlightCar last October. It’s a service that allows you to rent out your car when you go out of town. The issue is with San Francisco Airport, which wants to treat the company like any other rental outfit (and charge accordingly). Flightcar believes it is different--and should pay differently.

Since setting up at SFO in February, FlightCar has listed 1,400 cars, and organized 1,500 rentals. Customers pay as little as $21 per day, and owners get between $10 a day and $10 per rental, depending on the car’s age (and, of course, they don’t have to pay for parking).

You might think of the idea as cleverly making use of an idle asset: the car that normally sits in the airport lot doing nothing. But SFO isn’t happy. Its complaint reads:

FlightCar’s flouting of SFO’s permitting and fee requirements constitute an unlawful and unfair business practice in violation of the Unfair Competition Code.

But FlightCar points out that it doesn’t actually operate from airport property. It sends a town car to pick up, and drop off, renters and owners, operating out of a lot in Burlingame about 10 minutes away. CEO Rujul Zaparde says FlightCar employees never set foot at the airport, but it effectively gives SFO $3.65 per trip in tolls. When you count up the cost of taking renters and owners back and forth, that amounts to $14.60 per rental.

SFO wants $20 per rental, plus about 10% of profits, which is what it charges companies like Avis and Hertz (which can also advertise in the terminal). According to its complaint, SFO made $2 million from such fees last year--money it doesn’t want to lose, presumably.

Zaparde puts SFO’s complaint down to two factors: a misunderstanding of its business model, and pressure from established players. "Airport car rental is a $11.3 billion industry, and there’s really three companies out there. We’re definitely going to face opposition, because we’re changing the way things are done. These guys have had arrangements with airports for decades, and nobody has ever challenged it."

Zaparde reckons the old-line companies are hurting because of their higher costs. Unlike FlightCar, they have pay for things like vehicle maintenance, which eats into profits. "We have a more efficient model. That’s why we can pick up all our customers in a limo. They can’t afford to do the same thing."

That may be. But FlightCar does face a serious problem, because SFO isn’t the only one making unhappy noises. The operator of Boston’s Logan airport, FlightCar’s second location, also sent a cease-and-desist letter recently. (No word from LAX yet, where the company plans to go later this summer.)

Zaparde hopes the SFO disagreement will be sorted out before July 1, the next scheduled day in court. He’d like to reach a compromise, if a reasonable one was available--but he’s not going to give in. "We believe that what we’re doing is within the law."

Either way, it seems the sharing economy could be facing a period of legal uncertainty, which perhaps was inevitable. Whether it turns out to be a blip, or something more serious, only time will say.

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1 Comments

  • Sam

    This doesn't even mention that they have NO permits to operate their lot in Burlingame, not even a business license.  The city is in the process of evicting them.