Transportation Network Companies: Challenges and Opportunities for Airport Operators (2017)

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TransporTaTion neTwork Companies: Challenges and opporTuniTies for airporT operaTors summary Transportation network companies (TNCs) such as UberX, Lyft, Wingz, and others offer door-to-door, nonstop transportation as well as other transportation options (e.g., point-to-point shared transporta- tion such as UberPOOL and Lyft Line). Customers connect with and pay drivers, who use personal vehicles, through the company’s smartphone application. Since they initiated service in 2012, TNCs have become increasingly common, leading to their regulation by states and other jurisdictions as well as by airports. As of December 2016, TNCs are permitted to operate at more than 90 U.S. airports. The introduction of TNCs has resulted in new opportunities for airports. TNCs have increased the transportation options available to airport customers by (1) expanding the menu of available ground transportation services, and (2) offering service that customers consider to be reliable, convenient, and comfortable, and which is often cheaper than traditional airport ground transportation services, such as taxicabs, and provides a higher level of service than shared-ride vans. Further, oversight of TNC operations on airports requires less staff effort than do most other traditional ground transportation services. The introduction of TNCs has presented new challenges to airport staff. Available information indicates that at many airports TNCs are having an adverse effect on taxicab and shared-ride van businesses, airport public parking and rental car revenues, and terminal building curbside roadway operations. As the popularity of TNCs and associated traffic volumes increase, these adverse effects are expected to continue and potentially become more significant. Airport staff wishes to regulate TNC services to ensure that they operate in a safe and efficient manner consistent with other airport ground transportation services and reflect industry best practices. However, currently no document exists describing the industry’s best practices for regulating TNCs on airports. This synthesis report was prepared to address the opportunities and challenges posed by TNCs on airports. It summarizes how airport operators: • Permit and regulate TNCs; • Locate TNC passenger drop-off and pickup areas and TNC vehicle staging/holding areas; • Establish and enforce regulations concerning TNC drivers and vehicles, including penalties; • Establish the fees charged to TNCs and collect and confirm payment of such fees; • Monitor TNC vehicle trips, including the use of geofence boundaries and other tools to confirm and enforce TNC operations. This synthesis also summarizes the amount of revenue airports receive from TNCs and how TNCs are affecting airport operations and other businesses. Several challenges were encountered during the preparation of this synthesis. First, there are limited published data or available data documenting the effects of TNCs on airport operations and finance because most airports have been permitting TNCs for less than 12 months, and only a few airports have collected any before-and-after data. Second, the practices used to regulate TNCs are evolving as a result of (1) their increasing popularity, (2) the new forms of transportation services they are offering, (3) the new tools becoming available to airports to monitor TNC operations, and (4) in some jurisdictions, changes to TNC regulations.

2 To compensate for the lack of useful published data or available information on TNC operations at airports, an online survey was conducted during fall 2016 of the airport staff members responsible for ground transportation operations at the 100 largest U.S. airports. Responses were received from 72 air- ports. At 48 of the airports TNCs have signed an airport permit, whereas at 19 airports TNCs are oper- ating without an airport permit. Of the airports at which TNCs have signed permits, five reported that they were signed in 2014, 23 in 2015, and 15 in 2016, whereas five respondents did not specify the year. FAA defines airports by the proportion of annual aircraft boardings that an airport serves, with large hubs serving 1.0% or more of the annual U.S. aircraft boardings, medium hubs serving at least 0.25% but less than 1.0%, and small hubs serving at least 0.05% but less than 0.25%. Using these definitions, the airports responding to the survey included 24 large hub airports, 20 medium hubs, and 28 small hubs. As part of the online survey, airport staff were asked if they would be willing to participate in a more detailed telephone interview. Telephone calls were scheduled and interviews conducted with the staff of 19 airports. The information presented in this synthesis report is based on data gathered in 2016 and is current as of December 2016. TNCs are rapidly changing how passengers travel to and from airports, and these changes are expected to continue to evolve, if not accelerate. key findings 1. Airport permits and regulations: Airports rely on the regulations established by state or other local jurisdictions that establish minimum standards for companies, vehicles, and drivers. Most airports require that in order to drop off and pick up airport passengers, TNCs sign an airport permit indicating the company agrees to abide by airport regulations that supplement those established by the state or local jurisdiction. Airport regulations describe the required (1) use of airport roadways, locations for passenger drop-off and pickup, and vehicle staging; (2) payment of airport fees and the amount and type of these fees; (3) vehicle appearance and identification; (4) compliance with the airport’s general rules and those established by FAA; and (5) fines and suspensions. 2. TNC passenger drop-off and pickup areas and vehicle staging areas: At most airports (about 63% of the reporting airports), TNCs drop off customers at the same location as do private vehicles (e.g., the departures curbside adjacent to the ticketing lobby); the remaining airports require TNCs to drop off passengers at the commercial vehicle boarding area or at the pas- senger pickup/boarding areas. About 64% of the reporting airports require TNCs to pick up passengers at the commercial vehicle or private vehicle curbside boarding areas, whereas 34% require TNCs to pick up passengers at the areas designated for passenger drop-off or in a nearby parking structure or lot (Table 1). Of the airports surveyed, 82% provided a dedicated staging area—a surface lot (55%), an area within a parking structure (20%), or an area also used by taxicab, limousine, and other commercial ground transportation drivers (7%). Required TNC Passenger Pickup Location Number of Reporting Airports Percentage of Reporting Airports Commercial vehicle curbside boarding area 16 34 Private vehicle curbside boarding area 14 30 Nearby parking structure or lota 6 13 Same location as TNC drop-off (typically private vehicle passenger drop-off area) 10 21 Other 1 2 aIncludes those airports serving Cleveland, Harrisburg, Las Vegas, New Orleans, San Diego, and Seattle. Source: InterVISTAS Consulting, based on data reported by individual airports (December 2016). TAbLE 1 TNC PASSENgER PICkUP LOCATIONS

3 3. Enforcing airport regulations: Most airports (87% of those responding) rely on curbside traffic officers or airport operations staff to enforce TNC rules and regulations. Police support these traffic officers or are solely responsible for enforcement at nearly half of the responding air- ports. About 80% of the airports surveyed rely on self-reported trip data provided by the TNCs to confirm payment of the correct airport fees. More than 20 airports, including ten of those surveyed, use one of several TNC vehicle tracking tools to validate the self-reported trip data and support enforcement of TNC operations. 4. Fees charged TNCs: Most airports (47 of 48 of the surveyed airports with TNC permits) require that TNCs pay one or more of the following fees: – Annual permit fee. Of those airports, ten charge TNCs an annual permit fee—six charge each company less than $2,000 per year, and four charge more than $2,000 per year. – Per-trip fee. Of the surveyed airports, 87% require that TNCs pay a per-trip fee either alone or in combination with another fee (Figure 1). Some airports charge a per-trip fee only for passenger pickup (59%), but others charge for both passenger drop-off and pickup (41%). Table 2 summarizes the reported per-trip fees. – Activation fee. Some airports require TNCs to pay activation fees at the time they sign a permit, in recognition that the companies were conducting business on the airport without paying fees prior to signing the permit. Eight airports reported charging TNCs activation Per-trip Fees Charged for Fee Amount Pickup Only Drop-off and Pickup 0–$1.00 4 10% 2 5% $1.01–$1.99 1 2% 3 7% $2.00–$2.99 8 20% 6 15% $3.00–$3.99 7 17% 1 2% $4.00–$4.99 3 7% 5 12% $5.00 or more 1 2% 0 -- Totals 24 59% 17 41% Source: InterVISTAS Consulting, based on data reported by individual airports (December 2016). TAbLE 2 REPORTED TNC PER-TRIP FEES FIGURE 1 Reported TNC per-trip fee. Source: InterVISTAS Consulting, based on data reported by individual airports (December 2016).

4 fees. The amount of the activation fee charged varied considerably, with one airport charging between $1,000 and $2,000, one airport charging between $5,000 and $10,000, two airports charging between $50,000 and $100,000, and one airport charging $100,000 (San Francisco International Airport). – Minimum annual guarantee amount. Three airports reported charging TNCs the higher of either a per-trip fee or a minimum annual guarantee (MAg) amount. At these airports, the per-trip fees received exceeded the MAg amount. At airports where TNCs are charged a per-trip fee, each TNC is required to report the number of airport trips, calculate the fees due, and pay this amount on a monthly basis. Some airports require the TNCs to provide additional information, including the time and date of the trip, the driver’s ID, vehicle ID, and whether the vehicle was dropping off or picking up a passenger or both. The airport’s permit considers a trip to be a TNC vehicle entering and/or exiting a virtual boundary or “geofence” defined by global positioning system (gPS)–based geographic coordinates surround- ing the entire airport, its terminal area, or some other portion of the airport. The gPS coordinates are established by the airport, whereas the TNC is responsible for entering the coordinates to its platform and detecting and reporting each time one of its vehicles crosses the geofence. Of the airports surveyed, 40% have a supplemental geofence around their vehicle staging area to ensure that only drivers waiting in the staging area receive customer requests. 5. Revenues received from TNCs: The annual revenue airports receive from TNCs depends on the type and amount of the fees the TNCs are required to pay, the number of airport passen- gers, and maturity of the market (i.e., length of time TNCs have been serving the airport and adjacent community). At almost all airports, the volume of TNC trips has increased during the months the TNCs have been permitted to operate, with the volume of trips and fees paid expected to increase from those presented in this report. Figure 2 presents estimated annual revenues received from TNCs at 31 reporting airports. At 13 of the airports, TNCs have been permitted to operate for less than 1 year or the revenues for the most recent quarter reported were substantially higher than those of past quarters (reflecting an increasing market share). As a result, the best available data were annualized to represent estimated annual revenues. As shown, of the airports reporting TNC revenues, seven (all small-hub airports) received annual revenues of less than $100,000, ten airports received between $100,000 and $1 million, ten received between $1 and $5 million, and four (all large-hub airports) received more than $5 million, with two of them receiving more than $20 million. FIGURE 2 Estimated annual TNC revenues by airport size. Source: InterVISTAS Consulting, based on data reported by individual airports (December 2016).

5 6. Impact on airport operations: TNCs have had numerous impacts on airport operations, includ- ing those listed here. These impacts reflect the anecdotal information obtained from airport staff and the limited amount of revenue and operating statistics available from the participating airports. – Additional responsibilities for airport operations staff, with nine of the responding airports reporting adding or reassigning staff to oversee TNC operations. – Increased curbside or roadway congestion at 46% of the airports, particularly at airports with limited curb space and increasing volumes of TNC traffic. – A 5% to 30% decrease in taxicab trips and an 18% to 30% decrease in shared-ride customers. The decreases in the use of taxicabs and shared-ride vans appear to increase over time. It has also resulted in airport staff having to renegotiate concession agreements with the operators of these transportation services. – A 10% to 20% decline in the use of private vehicles, with parking customers down by 5% to 10%. – A reduction in rental car transactions, estimated to be 13% or less. – Little change in prearranged limousine business. Several airports reported experiencing little to no change in parking revenues or the use of other access modes. However, it appears the actual changes were masked by increases in air- line passenger volumes, parking rates, or other factors. Analyses prepared as part of this report indicate that, when data were available, there was a significant decline in parking transactions or trips by other modes on a per–airline-passenger basis. 7. Impact on airport total revenues: A larger question, not addressed by this synthesis, is whether the “new” revenues received from TNCs exceed the forgone revenues an airport would have received if TNCs were not permitted to operate. In particular, any decline in public parking or rental car revenues could adversely affect an airport’s finances because such revenues are the largest sources of nonairline revenues. A 2016 survey indicated the median gross parking revenues was $63 million for large-hub airports, $23 million for medium-hub airports, and about $9 million for small-hub airports. Thus, a 10% reduction in these parking revenues would equal or exceed the TNC revenues reported by all but two of the 31 the airports shown in Figure 2. These forgone revenues do not include any forgone revenues that may result from a change in the use of rental cars, taxicabs, or other transpor- tation services. key ConsideraTions Airports responding to the survey were asked to share (1) advice for other airports, particularly those that had not yet issued TNC permits, and (2) what they wished they had done differently. The key advice offered by the participating airport staff was: • Stay engaged in the regulatory process of the state or local jurisdiction. keep airport manage- ment informed of key issues. • Develop a good working relationship with the TNCs, particularly the local representatives. • Review permits or agreements used by other airports. It may facilitate negotiations if an airport can show that the TNCs have already agreed to a provision elsewhere. • When preparing the airport permit, include all desired features from the outset. Revising a permit has proven challenging. • Require that the companies train all drivers on airport regulations and use of airport roadways. Ask to review and comment upon the training material. • Provide a staging area that is separate from that used by taxicabs and limousines, one that is served by a roadway that provides adequate capacity. • Plan ahead. Identify possible locations for a passenger pickup area that can be expanded if necessary as the result of increasing customer demands. • Require that the TNC assume responsibility for drivers and driver issues. Establish clear enforce- ment actions as well as provisions for drivers using multiple platforms simultaneously.

6 • If considering acquiring tracking software, be sure to communicate with peer airports—both those that have the software and those that decided not to deploy it. • be sensitive to the needs of traditional ground transportation providers. nexT sTeps As noted, this synthesis was prepared with reliance on a limited amount of published information describing TNC operations at airports and a survey of airport staff. The information on the challenges and opportunities facing airports or industry best practices is limited because TNCs have been per- mitted to operate at most airports for less than 12 months at the time this report was prepared. It is suggested that consideration be given to: • Updating the survey, particularly the revenues airports receive from TNCs and the changes in the use of public parking, rental cars, and traditional ground transportation services. It is sug- gested that information be gathered from a larger number of airports, which will be feasible as an increasing number of airports have permitted TNCs for more than 12 months. • Monitoring the airport staff’s use of TNC tracking tools and the evolution and improvement of these tools. At the time this synthesis was prepared, only a handful of airports were using TNC tracking tools, with several airports having developed their own tools. It would be beneficial to document the benefits to airports from the use of these tools and the resulting costs. • Determining if the anticipated increasing popularity of TNCs results in a need for additional enforcement to ensure appropriate behavior by TNC drivers. Airport staff is reporting increased curbside and roadway congestion resulting from the increased volume of TNC traffic coupled with some drivers being unfamiliar with airport regulations. Research on the measures air- ports are employing to reduce congestion and ensure desired driver behavior would benefit the industry. • Analyzing the impacts of the anticipated adoption of automated vehicles, including the use of connected or self-driving vehicles by TNCs. The pace at which connected vehicles are being introduced is uncertain, as are the effects these vehicles will have on airport operations. However, research from initial tests on public roadways may be instructive.