Will Uber Replace Airport Taxis?

Uber is in the news this week after the California Labor Commission ruled in favor of an Uber driver who claimed that she is, in fact, an employee of the company and not an independent contractor. This decision has potentially enormous repercussions for Uber who could now be obliged to pay social security payments, employment taxes and, possibly, mileage expenses for all of its drivers.

Granted this decision won’t likely cause Uber to shut its doors. The company has faced opposition in the past from cities and airport authorities which have tried to ban Uber in favor of established taxi services. However, is there a chance that Uber will replace airport taxis? (For more, see: Laws & Regulations vs Internet Technology: Who Will Win.)

Uber Basics

Uber, for those who haven't heard of it, is a service where regular folks can sign up to be temporary taxi drivers. Using an app, they “sign on” for a shift and after accepting a fare, pick up the customer and are paid through the app. Customers don't have to have cash on them or tip, and Uber makes its money by taking a percentage of every fare before paying the drivers' accounts.

Taxi companies have taken issue with Uber's business model because they consider the unregulated industry of private taxi services unsafe for the public as the drivers are unlicensed. In addition, Uber, and UberX specifically, charge average rates which are lower than traditional taxis.

Uber, to entice new drivers has “surge pricing” in effect during peak times, which makes driving a more attractive option than, well, whatever else a normal person does in his off-time. To entice customers, Uber will offer coupons or free rides. These two practices make taxi companies uncompetitive for both drivers and customers when compared to Uber. (For more, see: Taxi Industry: Pros & Cons Of UBER And Other E-Hail Apps.)

Uber at the Airport

Unsurprisingly, taxi companies did not like that customers were deplaning and calling an Uber to meet them at arrivals. Airport taxis have to buy permits or pay entry fees to access the airport and, once there, wait in terribly long lines for a fare. Uber drivers, on the other hand, get a call because they are in the airport area and then bypass the taxi line to pick up their customers.

Consumers loved using Uber at the airport because of the immediate “wherever I am” pick-up, clean cars and drivers who are peer-reviewed and ranked. For customers coming from abroad, the convenience of not having to fumble with a new currency and the fixed or pre-calculated fare meant that people catching an Uber at the airport didn't need to worry about being ripped off by unscrupulous taxi drivers.

Uber Today

Today, Uber drivers still wait outside of airports and people are still requesting airport pick-ups – airports though, are cracking down on this illicit activity. For airports, this makes sense: if Uber pays no access fees to the arrivals area and takes away business from fee-paying taxis, well, the airport makes less money.

To combat this, airports have started charging Uber drivers entry fees. These fees are typically low, about $2-4, but some airports are either greedy or delusional – The Metropolitan Washington Airports Authority is proposing a $5,000 one-time permit fee plus a $5 per-trip pick-up and drop-off fee. To put those amounts into perspective, the proposed rates for limousines at the D.C.-area airports is a $250/$5 permit and access fee. (For more, see: Uber Versus Yellow Cabs In New York City.)

The Bottom Line

Not for no reason, taxi companies and airports are attacking Uber with everything they’ve got; taxi companies are scared of Uber and its superior product. There are often only two types of people taking a taxi at the airport: those who don’t know of Uber and those who are attracted to the convenience of having a taxi ready to go at the taxi stand.

Let’s pretend though that airports begin to let Uber do pick-ups for a small fee. This fee will, no doubt, be passed onto the consumer through a fare increase but, considering Uber’s numerous benefits over a taxi – the rating system, virtual payments, fixed rates, GPS navigation – allowing the service to co-exist with the traditional taxi stand at the airport pick-up area would undoubtedly see Uber replacing the majority of airport taxis.