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TNCs are changing surface access, so what next?

Posted 04/10/2019 by Raj Majithia


Over the last five years, TNCs (transportation network companies) such as Uber and Lyft have disrupted airport transport on the ground. And the trend shows no signs of slowing, as TNCs are growing rapidly into one of the most popular forms of surface access. But what’s driving the change? And what can we expect to happen as a result?

Take-off time for TNCs

According to a study by L.E.K., San Francisco has seen the market share of business travellers using TNCs rise from 8% in 2014 to 62% in 2017. While San Francisco is widely regarded as one of the world’s most mature TNC markets, the phenomenon is also clear elsewhere. The message is this: TNCs are swiftly becoming a viable alternative to traditional forms of surface access.

The growth of TNCs comes as no surprise to those in the transportation industry. One has only to look at their 24/7 availability, their convenient app, their consistent user experience, and their price competitiveness to boot. The appeal to consumers is clear.

 The markets adapt

With ups, come downs. The biggest market losers look set to be taxis, who are seeing their share of access drop dramatically. Some airports are predicting 50% declines in year-on-year taxi revenues from 2018-19. Meanwhile, TNC revenue is expected to rise to 34%. But taxis aren’t the only ones taking a hit. TNC use is also beginning to impact airport revenue.

With TNCs providing direct competition to traditional airport revenue sources such as on-site parking and car rentals, it’s patently clear that airports must adapt to their growth. The question for all airports is whether to adapt in their favour, or do all they can to mitigate their impact on revenue.

Options for airports

Many airports keen to lay a red carpet for the emerging TNC market are looking to transform spaces in order to better accommodate their needs. Under-utilised car parks are being turned into exclusive waiting areas for TNC drivers – simultaneously welcoming TNCs and freeing up curb side access.

Some airports are placing levied fees on journeys to and from the airport. Large levies can serve as a deterrent to TNCs, denying them the opportunity to offer competitive rates to consumers. Smaller levies allow TNCs to maintain competitive rates, while monetising TNC journeys for the airports, serving to offset the negative impact on parking and rentals.

What’s the final approach?

The demand for TNCs may not be slowing, but there could yet be turbulence ahead. The business model has of late been coming under increasing economic and legislative scrutiny.

In its most recent quarterly release, Uber’s trips have increased by 35% to 1.6 billion. Similarly, Lyft’s year-on-year active riders rose by 41% in Q2 2019. However, both companies continue to operate at a substantial loss, with no indication that they’ll become profitable anytime soon.

There’s legal trouble, too.

The State of California recently passed AB5, a legislation classifying certain gig economy workers as full-time employees, rather than independent contractors – a major blow to the business model of TNCs.

Furthermore in 2018, London’s TfL withdrew Uber’s operating license for not being ‘fit and proper’. The company has since been granted a series of short-term licenses by the courts, but their future in the UK capital is uncertain.

It remains unclear whether the economic and legislative challenges pose a significant threat to the future success of TNCs, or are a mere blip on their radar. But it must be said that TNCs have already become a viable alternative for people travelling to and from airports. And for that reason alone, it is clear that airports cannot ignore their success.

Those airports which are willing to adapt, even in the short-term, are seeing new revenue streams open up – showing that it’s not only consumers who can benefit from the evolution of the TNC industry.