FlightCar illustrates the promise and pain of the sharing economy

By Richard Nieva , written on June 11, 2013

From The News Desk

FlightCar is a company of the moment. And by that, I mean it in the way that people say certain works of literature are “of their moment,” and that they couldn’t exist in any other time in history. If Airbnb was the seminal company that ushered the sharing economy into the mainstream, and Uber put it on wheels, and RelayRides, in its similar quest to make use of idle assets, combined the two – all in a clusterfuck of litigation, regulation, and insurance woes – then FlightCar is where they all converge.

Although only available in SF and Boston for now, the company seems the perfect foil to illustrate the promise and pangs of a sharing economy business.

FlightCar is a truly clever service. In San Francisco, a traveler driving to the airport parks his car in nearby Burlingame, CA, near the San Francisco County border. In exchange for letting his car be rented by a stranger for the duration of his trip, the owner gets free parking, a car wash, and a cut of the rental fee. A black car drives him to his terminal, and back to the lot when he returns. It’s a win-win: Departees get free parking; arrivals get a good deal on rental cars.

There are some ideas that you admire for their simplicity, like the first iteration of Facebook. Then there are those you admire for their ability to layer different components and make it work. And Y Combinator-backed FlightCar seems an idea that couldn’t have happened without all of these disparate sharing economy elements gaining notoriety on their own.

Fittingly, though, while the company’s predecessors take on their own regulation issues, FlightCar is dealing with its own. It’s not surprising the company would encounter such red tape: The centerpiece of FlightCar’s business is the airport -- the same place that houses the TSA. The city of San Francisco recently sued the company, seeking penalties and an injunction.

The suit calls for FlightCar to pay fees associated with a traditional airport rental or livery business, demanding that the company pay $20 per car and a little over 10 percent of its profits to San Francisco Airport. Cofounder and CEO Rujul Zaparde says FlightCar shouldn’t have to do that because the city has wrongly categorized the business.

“They are trying to categorize us as an offsite car rental agency,” says Zaparde. “But we are a peer-to-peer car sharing company.”

Currently, Zaparde says, the company pays $14.60 per car to the airport based on standard livery fees. When the company first launched, Flightcar workers used to valet travelers to and from the terminal, but has since outsourced that task to third party black car companies, to be in line with regulations. The court date is set for July 1.

The funny thing about FlightCar's situation is its insistance that it's a car-sharing company. Not that it isn't true -- the court will decide that -- but the peer-to-peer car-sharing industry, which focuses specifically on the element of car owners listing their vehicles on a marketplace for others to rent out, has itself been tumultuous. RelayRides, which arguably leads the sector, last month stopped operations in New York State after receiving a cease and desist letter for alleged false advertising and violation of insurance law. And there is still a big unanswered question regarding insurance issues: If a driver gets into a collision whose damages exceed the $1 million in coverage that the car-sharing companies – including FlightCar – offer, who will pay the excess? The courts have provided no clear answer. Zaparde adds, though, that at least for right now, the company offers free collision insurance with a $500 deductible.

So on top of FlightCar’s tangles with city hall, it may also have to deal with the insurance challenges fundamental to car-sharing in the event of a major accident. “God forbid that should happen,” says Zaparde. “But we will deal with that case by case.”

Look at it this way: All of this is indicative of how disruptive the sharing economy can be -- when the presumably stable part of the business is unstable itself.