Updated: FlightCar, New Car-Sharing Start-Up, Expands Despite City Lawsuit
Update, Friday, 3:26 p.m.: A spokeswoman from FlightCar said via e-mail that customers who receive rental payments through the service can then use that money to ride BART, Muni or other forms of public transit, which will reduce the number of car trips in San Francisco. She also disputed many of the city attorney's claims and said that regulations should help consumers, not businesses.
Update, 2 p.m.: FlightCar says it's moved operations to a new lot in Millbrae to cooperate with the cease & desist letter from Burlingame.
Update: Cease and desist letter FlightCar received is at the bottom of this post.
Airports are the next major faultline for the sharing economy, and their regulators are already putting up a stout offense against the new spate of apps geared to disrupt the car-rental industry. Among them are two SOMA-based start-ups called Getaround and RelayRides, both of which entice users by offering hard cash for vehicles that would normally sit idle. But the Everest of car-sharing is FlightCar, a company launched by a trio of Ivy League dropouts who have already created a major thorn in the city's side.
Backed by a coterie of big-purse financiers -- including Ryan Seacrest and Andreessen Horowitz -- Boston-based FlightCar allows users to rent their cars out while they travel, rather than pay to park in an airport parking lot. Not surprisingly, the idea caught on -- a shrewd user can earn $10-$20 a day in passive income by stashing his wheels in the FlightCar parking lot, which isn't to mention the money he saves on airport parking fees. FlightCar has booked more than 2200 rentals since launching in San Francisco in February. It's also incurred a lawsuit from City Attorney Dennis Herrera, who called the business "unlawful and unfair" because it bypasses the airport's fees and permits.
Undeterred, the start-up's three founders -- all Ivy League dropouts in their teens -- hatched an even more ambitious plan to extend their car-sharing model to the city at large. Called "FlightCar Monthly," it will allow anyone in San Francisco to rent his idle car out for months at a time, for guaranteed income of $150-$400 a month. "We'll bring it back and give you a check on the spot," says the start-up's 18-year-old co-founder Rujul Zaparde, rattling off a practiced sales pitch. To him and his clientele, the service could be a panacea: no more street sweeping tickets; no having to move your car every eight hours; no jockeying for driveway space.
But having so many cars flood the streets of San Francisco could also be a nightmare after the service launches Monday. Herrera claims, in his court complaint, that FlightCar flouts airport rules that help reduce traffic congestion and pollution. Proclaiming itself a technology start-up rather than a traditional car rental company, it refuses to pay SFO the requisite 10 percent of all gross profits and $20 per rental transaction required of competitors like Hertz and Enterprise. That puts it at an unfair advantage, Herrera argues, noting billboard advertisements that illustrate the start-up's raison d'etre: "We have the cheapest rentals. Guaranteed. Prove us wrong and get a free rental."
Zaparde hopes to settle the claims outside of court, assuming that SFO is just buckling under pressure from traditional rental companies that pay millions in fees per year -- last year they supplied $94 million to keep SFO running smoothly, according to the court complaint. Yet he and the other founders may be in for a longer, more acrimonious battle than their counterparts at Uber or AirBnB.
In addition to Herrera's claim that the service flouts federal law, FlightCar received multiple complaints from the city of Burlingame, where its parking lot is located. Initially the city reprimanded the start-up for not providing sanitary facilities for its employees -- a problem FlightCar fixed by installing port-a-potties. In June, Burlingame code enforcement officer Sue Harris sent the start-up a cease-and-desist letter for violating several city zoning regulations.
Here's the letter:
In response, FlightCar moved operations over to a new, permitted facility in Millbrae, although it retains the Burlingame lot for overflow. The start-up's spokeswoman, Rosally Sapla, says the company is "optimizing existing inventory" so it won't have too many cars sitting in Burlingame. "They're hitting sold-out status frequently these past few weeks," she writes in an e-mail.
Yet it's unclear how FlightCar's business model will affect transit once it expands to the city at large. It may, indeed, democratize the American automobile by making it a cheaper and more accessible form of transit. And it may do that at the expense of busses, taxis, bicycles, and other services that the city has struggled to promote and protect. As we noted in a recent SF Weekly cover story, the SFMTA has a strategic goal to convert 50 percent of the city's trips to alternative forms of transit (bus, foot, or bike) just to keep the number of cars at its current level. A peer-to-peer car rental service won't help.