Uber – disrupting itself?

Transportation Network Company Uber, surely the best known globally of the TNCs, is frequently in the news for one reason or another.

Earlier this year it’s co-founder and CEO, Travis Kalanick, was forced to step down amidst mounting allegations of an adverse workplace culture and underpayment of drivers, compounded by a video in which he was seen to berate a driver who was questioning his contract terms. A search began for a more publicly-acceptable ‘face’ for the multi-billion dollar turnover company that is valued at close to USD70 billion from amongst the ranks of the US’ senior corporate executives. One is set to be appointed early in Sep-2017.

As Ariana Huffington, the media operator who some think could fill the role herself has said, the “new Uber” needs “no more brilliant jerks”.

Latterly one of Uber’s largest investors commenced a lawsuit, accusing the former CEO of engaging in fraud in order to “increase his power over Uber for his own selfish ends”.  Uber itself faces many lawsuits. This month Uber’s first employee, Ryan Graves, the Senior VP of Global Operations, resigned from that role.

Meanwhile, Uber continues operationally to lose money hand over fist despite extensive cash injections from investors that include the Saudi Sovereign Wealth Fund, which allow it to boast USD6.6 billion of cash-in-hand. An IPO planned since early 2016 has yet to take place. While the firm has tempered those losses it still managed to lose USD645 million on a turnover of USD8.7 billion in 2Q2017. While turnover is up by 17% on the first quarter of 2017 and losses are down by 9% there are too many echoes at a firm that was founded eight years ago (as ‘UberCab’) of another US company where the question is often heard, “when will the profits come?” – Twitter.

The growing net revenues of Uber, 2013 -2016

Source: The Market Mogul

It isn’t a true comparison though. Twitter has been unable to develop revenue streams but has no competitors in the 140-character soc-med segment. Uber, thanks to its many TNC divisions and growing number of offshoots like UberEats and self-drive cars and trucks (where it has lost ground recently to Tesla), has countless revenue streams but also has a myriad of competitors.

Those competitors include, according to a CAPA report 1 that was published last year, at least 30 firms active in the same peer-to-peer ridesharing space in more than one country. Some of the names will be familiar: Cabify (Spain, Portugal and Latin America); Careem (Dubai, Middle East, North Africa and South Asia); Grab (Southeast Asia); Didi Chuxing (China); myTaxi (Germany, including the British Hailo); and in the US Lyft, and Wingz which originally focused on rides to and from airports.

Quite apart from this competition, Uber faces other forms of disruption to its modus operandi. In a growing number of cities it faces the prospect of regulation forcing it to treat its drivers as employees rather than self-employed which has implications for sickness pay, holiday pay and the minimum wage where one exists. In a landmark case in London it has been granted leave to appeal a 2016 decision by an employment tribunal embracing all of the above.

At least Uber has many of its own drivers on its side – they welcome the freedom to work when they want – but the ‘leave to appeal’ may only delay the inevitable. Other, similar companies (for example Deliveroo) are implicated, there is a groundswell of public opinion against the M.O. of these companies and a chastened Conservative Party following the May-2017 General Election is less likely to support Uber against regulation as a previous Prime Minister, David Cameron, did.

At airports, as well as on the streets, there continue to be regular protests by taxi drivers against Uber and other TNCs. CAPA news items in the last few weeks have recorded such demonstrations in the US and Australia.

A multinational protest against Uber and other TNCs in Paris

Source: Daily Mail

At the same time there is a small but noticeable drift towards hybridity in the two modes with some traditional taxi companies adopting many of the sales techniques used by the TNCs, while the latter may be forced to behave more like taxi companies as greater regulation is forced upon them.

Some taxi companies may even see the prospect of a return to favour, as travel agents are doing in some countries. Could 2018 be the year of the return of the ‘middle man’?

And of course the activities of the TNCs impact on the wider travel and transport industries in many ways and the challenge is still evolving. The airport industry has yet to resolve holistically the conundrum of whether it is better to promote its car parks (which are big revenue earners but not exactly environmentally friendly) or whether it should take the side of ‘public transport’ – for example air-rail connections, which are environmentally friendlier, but which are not big revenue earners. Technically, TNCs are ‘public transport’ just as taxis and minicabs are.

Typically, an airport will now charge a TNC an administration fee plus a per pick-up and/or drop-off fee. A figure of USD3 seems to be par for the course. In 2016, when CAPA surveyed airports on this issue half of them were charging the TNCs nothing.

CAPA publishes news items on TNCs and their inter-action with airports and airlines frequently in its various ‘daily’ publications and its bespoke alerts.

*1 – the CAPA report referred to is AIRPORTS AND UBER: Transportation Network Companies now more welcome at airports (USD195)