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The commercial airline industry has lost money over the whole of its existence. If I'm flying from NYC to DAL, I'm flying the cheapest carrier (with a slight n

The commercial airline industry has lost money over the whole of its existence. If I'm flying from NYC to DAL, I'm flying the cheapest carrier (with a slight nod to Frequent Flyer programs). I'm not sure how Uber, Lyft, etc are any different than Southwest, American, etc. Cab companies (which I hate) and airlines saw this years ago and promoted regulations to protect their fees (and, thereby, wages). Airlines lost those regulations under Reagan. To wit, I had dinner with a few friends in SF and it was raining when we left: "I'll call an Uber and we can share. ewww... 250% surge pricing or $90. Lemme check Lyft. Sweet, Lyft is about $50. Our Lyft will be here in 3 minutes." There was zero friction switching from Uber to Lyft. Winning in this market seems to require a Level 4+ autonomous car [1] monopoly. Level 4+ autonomous cars are not going to be here anytime soon and Uber's not going to have a monopoly. So it's going to continue to be a gnarly pricewar, made worse by Level 3 (in which the "driver"/pilot is a student doing his homework for $5/hour, taking over driving once or twice per hour). Not sure I agree so much with the body of TFA but I certainly agree with its conclusion. [1] http://www.techrepublic.com/article/autonomous-driving-levels-0-to-5-understanding-the-differences/ http://www.techrepublic.com/article/autonomous-driving-level...

acchow 10y ago
> 250% surge pricing or $90. Lemme check Lyft. Sweet, Lyft is about $50. Our Lyft will be here in 3 minutes." There was zero friction switching from Uber to Lyft. That's not zero friction. Zero friction would be if you routed the directions under "Public Transit" in Google Maps and scrolled to the bottom where you can see both Lyft and Uber pricing (and clickable links) next to each other.
- hmate9 10y ago
  Technically you are correct, but you are just nitpicking. We understood exactly what he meant.
  - acchow 10y ago
    My point was the meta-search engine will eliminate the friction and eat the whole pie.
    - notahacker 10y ago
      A corollary of this is that whilst meta-search engines didn't take very much of the pie for themselves, the fiercer price-competition they imposed did take a much bigger chunk out of airlines' margins, and particularly the margins of travel agents reselling airline tickets. Uber at present is a travel agent, not an airline
    - 55555 10y ago
      Just as they have, interestingly, in the airline industry. Most people go to kayak, hipmunk, skyscanner, monondo, etc. The existence of meta search engines are a hint that the service is a commodity and margins will be slim.
- kharms 10y ago
  In the iOS Maps app if you have both apps installed that is exactly how it works. You just have to click "ride" instead of "transit."
avn2109 10y ago
TFA and a lot of commenters here don't seem to understand that Uber doesn't want to compete with taxi services, which are a niche business to be disrupted en route to the real prize. It wants to compete with your car - imagine 12 lanes of L.A. traffic composed mostly of Ubers. That's their dream. They even admit this in public. [0] The day they can get cost per mile one penny below what you'd spend owning a Toyota Camry, they'll open up the biggest transport market ever created (the intentionally-inefficient American built environment). They're taking all this VC money and expanding so aggressively not because they like the scale, but rather because that's the only way to compete with private car ownership. [0] https://twitter.com/travisk/status/564065776005808128 https://twitter.com/travisk/status/564065776005808128
- SatvikBeri 10y ago
  I agree that Uber is trying to replace private car ownership, and I expect ride-sharing services like Uber/Lyft to succeed at this. But given those assumptions, is there any reason to expect them to be massively profitable? The current market seems to involve Uber & Lyft (& other competitors in different locations) competing on price, do you expect that to stop?
  - avn2109 10y ago
    Presumably the (publicly) unacknowledged plan is to severely wound private car ownership and then collude with Lyft to fix prices, similar to how it worked with Didi in China [0]. There will likely be some regulatory capture on the side to discourage other competitors. [0] http://www.wsj.com/articles/china-opens-antitrust-investigation-of-didi-uber-deal-1472794452 http://www.wsj.com/articles/china-opens-antitrust-investigat...
    - erispoe 10y ago
      Airlines used to collude on price, too.
- vannevar 10y ago
  This is a good point, but it doesn't change the prognosis. Uber will run out of runway long before that vision can be realized. And even if by some miracle it doesn't, it will find itself in a low-margin commodity business. Unless it can muscle its way into a monopoly, it can't win. Which explains the company's aggressiveness and anti-competitive nature.
vannevar 10y ago
The commercial airline industry has lost money over the whole of its existence. That is clearly not true. See, for example: http://www.iata.org/pressroom/pr/Pages/2016-12-08-01.aspx http://www.iata.org/pressroom/pr/Pages/2016-12-08-01.aspx If I'm flying from NYC to DAL, I'm flying the cheapest carrier (with a slight nod to Frequent Flyer programs). It's true that many people bargain hunt, but the people that don't (primarily business people who need to fly on short notice and on fixed schedules) subsidize lower fares for those who do. At the moment, it is the investors who are subsidizing lower fares at Uber and Lyft, to the tune of billions of dollars per year. You're right about the autonomous cars. At this rate, Uber will run out of money before autonomous cars can save it. And even if they do, Uber will be a low margin business.
- CoffeeDregs 10y ago
  That is clearly not true. See, for example: [Industry publication] A clarification: I meant that if you would show a net loss if you summed the net income of each airline in the industry since inception. To be fair, while it definitely isn't clearly not true, my statement certainly is not clearly true... ;) Some non-industry pubs backing my not-clearly-true statement: http://faculty.haas.berkeley.edu/borenste/download/AERPP11AirProfits.pdf http://faculty.haas.berkeley.edu/borenste/download/AERPP11Ai... http://www.investopedia.com/stock-analysis/031714/why-airlines-arent-profitable-dal-ual-aal-luv-jblu.aspx http://www.investopedia.com/stock-analysis/031714/why-airlin... https://priceonomics.com/can-airlines-make-money/ https://priceonomics.com/can-airlines-make-money/
  - vannevar 10y ago
    Maybe so, since it would include a lot of government-owned and government-controlled airlines whose fares were subsidized by tax money in the interest of the public good. In that sense, they're a bit like Uber, which is subsidized by its investors in the interest of...well, attracting even more investors and keeping the whole pyramid scheme going.
    - ghaff 10y ago
kyleschiller 10y ago
I don't think Uber necessarily needs a monopoly to win, if Lyft wants to compete on price it's free to due so, but if Uber has thin margins as it is, undercutting them is just a shortcut to death. I might be unreasonably optimistic about self-driving cars, but it is important to note that the rollout will accelerate itself. The more SDCs on the road, the safer they'll be, and the more data they'll gather. On the legislation side, my sense is that once one company bears the brunt of the legal pushback, the rest will have a relatively easy time. Not that BI has a crystal ball, but their prediction seems at least somewhat reasonable. [1] [1] http://www.businessinsider.com/report-10-million-self-driving-cars-will-be-on-the-road-by-2020-2015-5-6 http://www.businessinsider.com/report-10-million-self-drivin...
AJ007 10y ago
I'm not sure why a Level 3 needs to be a person in the vehicle? Uber may time their IPO just before they start having growth problems. That seems to have a high probability. The contrarian side of me thinks that the more negative people become about a tech company the more likely it is to succeed (assuming a real product and not elaborate fraud.) Markets become far more favorable when all of your competitors believe what you are doing is a joke. The paradox being, perhaps the more people become convinced Uber will fail, the more likely it is they can pull this off. It definitely is not as clear cut as starting an airline -- and it is a dynamic game. Is Uber/Lyft the starting point for calling a car or is it Android/iOS ; or is it Google Maps/Apple Maps ; or may be it is Siri/Alexa/etc. I've suggested in other posts a ride sharing company may be able to get exclusivity contracts for a large metro area. This would be a step towards a lock in/monopoly. Earlier gen self driving vehicles may actually even need this. Whatever behaviors Uber has created, I think they are going to survive in some form for a long time. Whether Uber goes belly up may be more about how carefully they hedged their financial risks.
- tobrepeels 10y ago
  "Is Uber/Lyft the starting point for calling a car or is it Android/iOS ; or is it Google Maps/Apple Maps ; or may be it is Siri/Alexa/etc." - This is an extremely good and often overlooked point. With Apple, Google, and Amazon now offering AI-powered smart-home devices (i.e., Google Home, Alexa) as well as mobile assistants like Siri and Android Assistant, they will increasingly own the first point of contact for a user when they need to hail a car. You could hail a ride without even having to open the Uber App at all, meaning that from a consumer perspective the relationship has shifted upstream to the phone OS or connected device, and Uber now becomes the behind-the-scenes middle-layer that runs the dispatch logistics. Right now, Google/Apple/Amazon operate under the guise that they are "integrating" with Uber's services, but when Google and Apple roll out their own autonomous vehicles (which they already are working on) and Amazon starts rolling out autonomous logistics (i.e., trucks and drones) then they will own both the upstream point of contact, as well as the downstream supply of cars/trucks/drones. When they have built the user behavior of people ordering directly from a phone OS or in-home device, what's to prevent them from connecting directly to their self-owned fleet and cutting out the middle layer (Uber) completely? While everyone is focused on Lyft...Uber's real competitor is one or all of the above situations. Piggy-backing off Uber in the connected home / OS integrations is as classic of an example of a trojan horse maneuver as I have ever seen.
niftich 10y ago
Let's forget about aviation flag carriers and the 'orthodox' legacy US airlines for a moment. How do 'low-cost' airlines make any money, especially in Europe where they advertise fares for paltry amounts? Even with charging extra for bags, food, early boarding, decent seating, etc., does the money they make per passenger cover fuel costs and landing fees alone or is profitable in any sense of the word? What are the business incentives in entering this market, then? A hypothesis is that low-cost airlines often fly to lesser-known airports further away from popular cities and extensive hub operations; airports which have a difficult time attracting orthodox airlines for these reasons. Therefore, such secondary airports compete against each other to attract carriers, because without a commercial carrier the utility of the airport greatly diminishes for the residents of the immediate area, who may demand to redirect government funds to other expenses. But if an area can retain its airport with commercial service, multiple fringe benefits result: local businesses will be patronized by air travellers even if just to get to the major city of their choice, and the area's profile will be raised on a national level which may make it more attractive to businesses and discretionary residents. Therefore, we can assume that some amount of government subsidy finds its way into the pocket of low-cost airlines that choose to serve a particular airport. I posit that local governments face similar pressures with regard to improving accessibility to metropolitan points-of-interest and a large-network provider like Uber may be able to offer a solution at a price the government is willing to pay. This has already happened in New Jersey [1], and I expect to see more of this in the future. [1] http://www.theverge.com/2016/10/3/13147680/uber-new-jersey-free-ride-parking-lot-train-commute http://www.theverge.com/2016/10/3/13147680/uber-new-jersey-f...
- niftich 10y ago
  In short: I propose that Uber's long-term business model is to win lucrative government contracts and absorb subsidies, by operating a transportation network big and elastic enough to meet criteria and provide the requisite level-of-service. It's essentially a purpose-made PPP (public-private partnership) company, the transportation equivalent to Skanska, Fluor, Strabag (if you're familiar with large-scale infrastructure projects), or, an automobile-based version of school transportation contractors, charter services, and the like. This is irrespective of whether they have human- or self-driving vehicles.
LordHumungous 10y ago
>The commercial airline industry has lost money over the whole of its existence. Wait, what? How can that be possible? Wouldn't the airlines cease to exist if they never generated profits?
- nesyt 10y ago
  I'm not sure where the parent is drawing that claim from but I imagine they could continue to exist with government subsidies.
- marcosdumay 10y ago
  There are subsides, and there is a difference between "losing money most of the time" and "losing money on average".
- matthewowen 10y ago
  Not saying this is the case here, but the answer is by bankruptcy and continual capital investments. Let's assume that some small number of airlines continually make small profits (or at least break even). That creates a non-negative balance. However, let's assume that a number of other airlines are frequently being established and receiving capital investment, before ultimately failing and declaring bankruptcy. If the losses those airlines represent outweigh the positive balance from our successes, then the industry loses money, despite some players continuing to exist. To take it further: if you assume people keep making capital investments with capital drawn from other industries, it's possible that the industry continues to exist even whilst no company generates profits in the long term.
- btilly 10y ago
  This is possible thanks to Chapter 11 bankruptcy. In most countries when you go bankrupt, you go out of business. In the US you usually go into Chapter 11. This lets you default on some of your debt, renegotiate contracts, and then come out of bankruptcy stronger than before. The problem with this is shown with airlines. They would all make a profit if they could just lose some of them. Unfortunately whenever that looks like it might happen, the loser goes into Chapter 11, enjoys a competitive advantage, recovers, and comes out of it stronger. Then someone else goes bankrupt.
lg 10y ago
southwest is profitable. anyway uber does not have to deal with pilots' unions and the faa regulations: http://philip.greenspun.com/flying/unions-and-airlines http://philip.greenspun.com/flying/unions-and-airlines
xux 10y ago
Airline is a classic case of an industry that has too much competition. All these airlines cause inefficient routing, and they're continuously forced to cut prices to compete. This results in bad margins and bad service. Literally no body wins. Uber / Lyft could be profitable as duopolies though. As in the case of Pepsi and Coke, both can happily carve out their niche and don't rock the boat too much.
- LordHumungous 10y ago
  Except for consumers who can fly around the world for insanely low prices.
gumby 10y ago
> Airlines lost those regulations under Reagan Actually it was under Carter -- he pushed for it, spurred by Alfred Kahn whom he appointed to the CAB: https://en.wikipedia.org/wiki/Airline_Deregulation_Act https://en.wikipedia.org/wiki/Airline_Deregulation_Act Carter was also the one who chose Volker to head the fed and squeeze inflation (to kill stagflation). This cost Carter the election because it also squeezed the economy...but ignited a recovery that Reagan got credit for.
- gmarx 10y ago
  It's fascinating how many things that started under Carter people misremember and attribute solely to Reagan. We really do reform our memories to conform to simple stories
  - gumby 10y ago
    Carter's decision to do this reminds me of Johnson's comment about "losing the south for a generation" with the civil rights act. Despite the stereotype, typically the economy sucks under republicans and is repaired by democrat (Eisenhower is an exception, and Roosevelt took a while to figure out what to do, but I did say "generally"). Remember the concern under Clinton that the national debt might be retired and what a disaster that would be? Since I'm in the realm of gross generalizations it's often under Democrats that wars have ramped up: well, Roosevelt again, Kennedy and Johnson Vietnam, and, yes, Obama on the secret side) while republicans can close them off: Nixon (Viet nam & the cold war with China, Reagan/Bush sr Cold War with Russia. But this link is even more tenuous.
    - gmarx 10y ago
      perhaps but if you look at per capita growth over the past hundred plus years in the US, aside from the great depression, you see pretty uniform growth no matter which party is in office. Also, the Clinton debt thing is overblown (my opinion) all that happened was a shift from public to private borrowing and I don't see what positive effect that had, temporary though it was. The whole Clinton miracle was a combination of coming out of a recession into an investment bubble.
ern 10y ago
Airlines lost those regulations under Reagan Under Carter. https://en.wikipedia.org/wiki/Airline_Deregulation_Act https://en.wikipedia.org/wiki/Airline_Deregulation_Act
Spooky23 10y ago
Airline regulations were totally different. The point of those regulations were to ensure universal service and stability of service. It was an outgrowth of passenger rail regulatory frameworks, which emerged after the abuses inflicted by the railroads in the 20th century. The absence of regulation has been good & bad. Prices are cheaper, but the service levels are horrific and the airline businesses aren't very sustainable.
mandevil 10y ago
The Airline Deregulation Act of 1978 (to disestablish the CAB) was passed during the Carter administration, not Reagan. Also, while the 2001 recession meant that the airline industry lost more money then they had made in profit from the Wright Brothers up to that point, since then they have become net positive again, which seems to have been largely from mergers reducing capacity and so driving down supply.
tyingq 10y ago
>>The commercial airline industry has lost money over the whole of its existence...I'm not sure how Uber, Lyft, etc are any different than Southwest, American, etc That's not exactly true. Southwest, for example, has had only a single unprofitable quarter since being a public company. They have never had an unprofitable year. American has had stretches of bad times, leading to bankruptcy, in the past. But, more recently, are making money. $7.6 billion in profit for 2015, $4.2 billion in 2014, and so forth.
my_first_acct 10y ago
> Airlines lost those regulations under Reagan. Not really relevant to the main discussion, but I think it is important to make sure readers are exposed to accurate (though perhaps overly detailed) historical information. According to [1] and [2], talk of US airline deregulation began during the Nixon administration, and picked up speed in the Ford administration. In 1975 the US Senate began pushing towards airline deregulation, under the leadership of Sen. Ted Kennedy (not the first politician who comes to mind when you think of reducing government regulation). The Airline Deregulation Act was signed into law by Jimmy Carter in 1978, who already in 1977 had appointed a well-known proponent of deregulation, the economist Alfred E. Kahn, to head the Civil Aeronautics Board (the government agency in charge of regulating airline routes and prices). The Civil Aeronautics Board indeed lingered on until the Reagan administration abolished it in 1985, but the 1978 Airline Deregulation Act is when it effectively lost control. [1] https://en.wikipedia.org/wiki/Airline_Deregulation_Act https://en.wikipedia.org/wiki/Airline_Deregulation_Act [2] https://en.wikipedia.org/wiki/Airline_deregulation#Introduction https://en.wikipedia.org/wiki/Airline_deregulation#Introduct...
bogomipz 10y ago
>Airlines lost those regulations under Reagan" It was actually Jimmy Carter that signed the Airline Deregulation Act, this was in 1978. 3 years before Reagan took office. The transition was complete by the end of the Reagan's first year in office in 1981. I'm not trying to nit pick but for some reason Reagan always gets credit for this.
xapata 10y ago
Airlines appear to have turned that around in the last few years. Full flights and profit.
sbuttgereit 10y ago
Uh... Airline deregulation came to pass under Carter, not Reagan. Yes, that breaks some of the left/right stereotypes that drive modern political discourse... But what can I say? It was a more pragmatic time.
motiw 10y ago
I think they will start making money when they will stop fighting and figure how to do "price fixing"

acchow 10y ago

> 250% surge pricing or $90. Lemme check Lyft. Sweet, Lyft is about $50. Our Lyft will be here in 3 minutes." There was zero friction switching from Uber to Lyft. That's not zero friction. Zero friction would be if you routed the directions under "Public Transit" in Google Maps and scrolled to the bottom where you can see both Lyft and Uber pricing (and clickable links) next to each other.

hmate9 10y ago
Technically you are correct, but you are just nitpicking. We understood exactly what he meant.
- acchow 10y ago
  My point was the meta-search engine will eliminate the friction and eat the whole pie.
  - notahacker 10y ago
    A corollary of this is that whilst meta-search engines didn't take very much of the pie for themselves, the fiercer price-competition they imposed did take a much bigger chunk out of airlines' margins, and particularly the margins of travel agents reselling airline tickets. Uber at present is a travel agent, not an airline
  - 55555 10y ago
    Just as they have, interestingly, in the airline industry. Most people go to kayak, hipmunk, skyscanner, monondo, etc. The existence of meta search engines are a hint that the service is a commodity and margins will be slim.
kharms 10y ago
In the iOS Maps app if you have both apps installed that is exactly how it works. You just have to click "ride" instead of "transit."

avn2109 10y ago

TFA and a lot of commenters here don't seem to understand that Uber doesn't want to compete with taxi services, which are a niche business to be disrupted en route to the real prize. It wants to compete with your car - imagine 12 lanes of L.A. traffic composed mostly of Ubers. That's their dream. They even admit this in public. [0] The day they can get cost per mile one penny below what you'd spend owning a Toyota Camry, they'll open up the biggest transport market ever created (the intentionally-inefficient American built environment). They're taking all this VC money and expanding so aggressively not because they like the scale, but rather because that's the only way to compete with private car ownership. [0] https://twitter.com/travisk/status/564065776005808128 https://twitter.com/travisk/status/564065776005808128

SatvikBeri 10y ago
I agree that Uber is trying to replace private car ownership, and I expect ride-sharing services like Uber/Lyft to succeed at this. But given those assumptions, is there any reason to expect them to be massively profitable? The current market seems to involve Uber & Lyft (& other competitors in different locations) competing on price, do you expect that to stop?
- avn2109 10y ago
  Presumably the (publicly) unacknowledged plan is to severely wound private car ownership and then collude with Lyft to fix prices, similar to how it worked with Didi in China [0]. There will likely be some regulatory capture on the side to discourage other competitors. [0] http://www.wsj.com/articles/china-opens-antitrust-investigation-of-didi-uber-deal-1472794452 http://www.wsj.com/articles/china-opens-antitrust-investigat...
  - erispoe 10y ago
    Airlines used to collude on price, too.
vannevar 10y ago
This is a good point, but it doesn't change the prognosis. Uber will run out of runway long before that vision can be realized. And even if by some miracle it doesn't, it will find itself in a low-margin commodity business. Unless it can muscle its way into a monopoly, it can't win. Which explains the company's aggressiveness and anti-competitive nature.

vannevar 10y ago

The commercial airline industry has lost money over the whole of its existence. That is clearly not true. See, for example: http://www.iata.org/pressroom/pr/Pages/2016-12-08-01.aspx http://www.iata.org/pressroom/pr/Pages/2016-12-08-01.aspx If I'm flying from NYC to DAL, I'm flying the cheapest carrier (with a slight nod to Frequent Flyer programs). It's true that many people bargain hunt, but the people that don't (primarily business people who need to fly on short notice and on fixed schedules) subsidize lower fares for those who do. At the moment, it is the investors who are subsidizing lower fares at Uber and Lyft, to the tune of billions of dollars per year. You're right about the autonomous cars. At this rate, Uber will run out of money before autonomous cars can save it. And even if they do, Uber will be a low margin business.

CoffeeDregs 10y ago
That is clearly not true. See, for example: [Industry publication] A clarification: I meant that if you would show a net loss if you summed the net income of each airline in the industry since inception. To be fair, while it definitely isn't clearly not true, my statement certainly is not clearly true... ;) Some non-industry pubs backing my not-clearly-true statement: http://faculty.haas.berkeley.edu/borenste/download/AERPP11AirProfits.pdf http://faculty.haas.berkeley.edu/borenste/download/AERPP11Ai... http://www.investopedia.com/stock-analysis/031714/why-airlines-arent-profitable-dal-ual-aal-luv-jblu.aspx http://www.investopedia.com/stock-analysis/031714/why-airlin... https://priceonomics.com/can-airlines-make-money/ https://priceonomics.com/can-airlines-make-money/
- vannevar 10y ago
  Maybe so, since it would include a lot of government-owned and government-controlled airlines whose fares were subsidized by tax money in the interest of the public good. In that sense, they're a bit like Uber, which is subsidized by its investors in the interest of...well, attracting even more investors and keeping the whole pyramid scheme going.
  - ghaff 10y ago

kyleschiller 10y ago

I don't think Uber necessarily needs a monopoly to win, if Lyft wants to compete on price it's free to due so, but if Uber has thin margins as it is, undercutting them is just a shortcut to death. I might be unreasonably optimistic about self-driving cars, but it is important to note that the rollout will accelerate itself. The more SDCs on the road, the safer they'll be, and the more data they'll gather. On the legislation side, my sense is that once one company bears the brunt of the legal pushback, the rest will have a relatively easy time. Not that BI has a crystal ball, but their prediction seems at least somewhat reasonable. [1] [1] http://www.businessinsider.com/report-10-million-self-driving-cars-will-be-on-the-road-by-2020-2015-5-6 http://www.businessinsider.com/report-10-million-self-drivin...

AJ007 10y ago

I'm not sure why a Level 3 needs to be a person in the vehicle? Uber may time their IPO just before they start having growth problems. That seems to have a high probability. The contrarian side of me thinks that the more negative people become about a tech company the more likely it is to succeed (assuming a real product and not elaborate fraud.) Markets become far more favorable when all of your competitors believe what you are doing is a joke. The paradox being, perhaps the more people become convinced Uber will fail, the more likely it is they can pull this off. It definitely is not as clear cut as starting an airline -- and it is a dynamic game. Is Uber/Lyft the starting point for calling a car or is it Android/iOS ; or is it Google Maps/Apple Maps ; or may be it is Siri/Alexa/etc. I've suggested in other posts a ride sharing company may be able to get exclusivity contracts for a large metro area. This would be a step towards a lock in/monopoly. Earlier gen self driving vehicles may actually even need this. Whatever behaviors Uber has created, I think they are going to survive in some form for a long time. Whether Uber goes belly up may be more about how carefully they hedged their financial risks.

tobrepeels 10y ago
"Is Uber/Lyft the starting point for calling a car or is it Android/iOS ; or is it Google Maps/Apple Maps ; or may be it is Siri/Alexa/etc." - This is an extremely good and often overlooked point. With Apple, Google, and Amazon now offering AI-powered smart-home devices (i.e., Google Home, Alexa) as well as mobile assistants like Siri and Android Assistant, they will increasingly own the first point of contact for a user when they need to hail a car. You could hail a ride without even having to open the Uber App at all, meaning that from a consumer perspective the relationship has shifted upstream to the phone OS or connected device, and Uber now becomes the behind-the-scenes middle-layer that runs the dispatch logistics. Right now, Google/Apple/Amazon operate under the guise that they are "integrating" with Uber's services, but when Google and Apple roll out their own autonomous vehicles (which they already are working on) and Amazon starts rolling out autonomous logistics (i.e., trucks and drones) then they will own both the upstream point of contact, as well as the downstream supply of cars/trucks/drones. When they have built the user behavior of people ordering directly from a phone OS or in-home device, what's to prevent them from connecting directly to their self-owned fleet and cutting out the middle layer (Uber) completely? While everyone is focused on Lyft...Uber's real competitor is one or all of the above situations. Piggy-backing off Uber in the connected home / OS integrations is as classic of an example of a trojan horse maneuver as I have ever seen.

niftich 10y ago

Let's forget about aviation flag carriers and the 'orthodox' legacy US airlines for a moment. How do 'low-cost' airlines make any money, especially in Europe where they advertise fares for paltry amounts? Even with charging extra for bags, food, early boarding, decent seating, etc., does the money they make per passenger cover fuel costs and landing fees alone or is profitable in any sense of the word? What are the business incentives in entering this market, then? A hypothesis is that low-cost airlines often fly to lesser-known airports further away from popular cities and extensive hub operations; airports which have a difficult time attracting orthodox airlines for these reasons. Therefore, such secondary airports compete against each other to attract carriers, because without a commercial carrier the utility of the airport greatly diminishes for the residents of the immediate area, who may demand to redirect government funds to other expenses. But if an area can retain its airport with commercial service, multiple fringe benefits result: local businesses will be patronized by air travellers even if just to get to the major city of their choice, and the area's profile will be raised on a national level which may make it more attractive to businesses and discretionary residents. Therefore, we can assume that some amount of government subsidy finds its way into the pocket of low-cost airlines that choose to serve a particular airport. I posit that local governments face similar pressures with regard to improving accessibility to metropolitan points-of-interest and a large-network provider like Uber may be able to offer a solution at a price the government is willing to pay. This has already happened in New Jersey [1], and I expect to see more of this in the future. [1] http://www.theverge.com/2016/10/3/13147680/uber-new-jersey-free-ride-parking-lot-train-commute http://www.theverge.com/2016/10/3/13147680/uber-new-jersey-f...

niftich 10y ago
In short: I propose that Uber's long-term business model is to win lucrative government contracts and absorb subsidies, by operating a transportation network big and elastic enough to meet criteria and provide the requisite level-of-service. It's essentially a purpose-made PPP (public-private partnership) company, the transportation equivalent to Skanska, Fluor, Strabag (if you're familiar with large-scale infrastructure projects), or, an automobile-based version of school transportation contractors, charter services, and the like. This is irrespective of whether they have human- or self-driving vehicles.

LordHumungous 10y ago

>The commercial airline industry has lost money over the whole of its existence. Wait, what? How can that be possible? Wouldn't the airlines cease to exist if they never generated profits?

nesyt 10y ago
I'm not sure where the parent is drawing that claim from but I imagine they could continue to exist with government subsidies.
marcosdumay 10y ago
There are subsides, and there is a difference between "losing money most of the time" and "losing money on average".
matthewowen 10y ago
Not saying this is the case here, but the answer is by bankruptcy and continual capital investments. Let's assume that some small number of airlines continually make small profits (or at least break even). That creates a non-negative balance. However, let's assume that a number of other airlines are frequently being established and receiving capital investment, before ultimately failing and declaring bankruptcy. If the losses those airlines represent outweigh the positive balance from our successes, then the industry loses money, despite some players continuing to exist. To take it further: if you assume people keep making capital investments with capital drawn from other industries, it's possible that the industry continues to exist even whilst no company generates profits in the long term.
btilly 10y ago
This is possible thanks to Chapter 11 bankruptcy. In most countries when you go bankrupt, you go out of business. In the US you usually go into Chapter 11. This lets you default on some of your debt, renegotiate contracts, and then come out of bankruptcy stronger than before. The problem with this is shown with airlines. They would all make a profit if they could just lose some of them. Unfortunately whenever that looks like it might happen, the loser goes into Chapter 11, enjoys a competitive advantage, recovers, and comes out of it stronger. Then someone else goes bankrupt.

lg 10y ago

southwest is profitable. anyway uber does not have to deal with pilots' unions and the faa regulations: http://philip.greenspun.com/flying/unions-and-airlines http://philip.greenspun.com/flying/unions-and-airlines

xux 10y ago

Airline is a classic case of an industry that has too much competition. All these airlines cause inefficient routing, and they're continuously forced to cut prices to compete. This results in bad margins and bad service. Literally no body wins. Uber / Lyft could be profitable as duopolies though. As in the case of Pepsi and Coke, both can happily carve out their niche and don't rock the boat too much.

LordHumungous 10y ago
Except for consumers who can fly around the world for insanely low prices.

gumby 10y ago

> Airlines lost those regulations under Reagan Actually it was under Carter -- he pushed for it, spurred by Alfred Kahn whom he appointed to the CAB: https://en.wikipedia.org/wiki/Airline_Deregulation_Act https://en.wikipedia.org/wiki/Airline_Deregulation_Act Carter was also the one who chose Volker to head the fed and squeeze inflation (to kill stagflation). This cost Carter the election because it also squeezed the economy...but ignited a recovery that Reagan got credit for.

gmarx 10y ago
It's fascinating how many things that started under Carter people misremember and attribute solely to Reagan. We really do reform our memories to conform to simple stories
- gumby 10y ago
  Carter's decision to do this reminds me of Johnson's comment about "losing the south for a generation" with the civil rights act. Despite the stereotype, typically the economy sucks under republicans and is repaired by democrat (Eisenhower is an exception, and Roosevelt took a while to figure out what to do, but I did say "generally"). Remember the concern under Clinton that the national debt might be retired and what a disaster that would be? Since I'm in the realm of gross generalizations it's often under Democrats that wars have ramped up: well, Roosevelt again, Kennedy and Johnson Vietnam, and, yes, Obama on the secret side) while republicans can close them off: Nixon (Viet nam & the cold war with China, Reagan/Bush sr Cold War with Russia. But this link is even more tenuous.
  - gmarx 10y ago
    perhaps but if you look at per capita growth over the past hundred plus years in the US, aside from the great depression, you see pretty uniform growth no matter which party is in office. Also, the Clinton debt thing is overblown (my opinion) all that happened was a shift from public to private borrowing and I don't see what positive effect that had, temporary though it was. The whole Clinton miracle was a combination of coming out of a recession into an investment bubble.

ern 10y ago

Airlines lost those regulations under Reagan Under Carter. https://en.wikipedia.org/wiki/Airline_Deregulation_Act https://en.wikipedia.org/wiki/Airline_Deregulation_Act

Spooky23 10y ago

Airline regulations were totally different. The point of those regulations were to ensure universal service and stability of service. It was an outgrowth of passenger rail regulatory frameworks, which emerged after the abuses inflicted by the railroads in the 20th century. The absence of regulation has been good & bad. Prices are cheaper, but the service levels are horrific and the airline businesses aren't very sustainable.

mandevil 10y ago

The Airline Deregulation Act of 1978 (to disestablish the CAB) was passed during the Carter administration, not Reagan. Also, while the 2001 recession meant that the airline industry lost more money then they had made in profit from the Wright Brothers up to that point, since then they have become net positive again, which seems to have been largely from mergers reducing capacity and so driving down supply.

tyingq 10y ago

>>The commercial airline industry has lost money over the whole of its existence...I'm not sure how Uber, Lyft, etc are any different than Southwest, American, etc That's not exactly true. Southwest, for example, has had only a single unprofitable quarter since being a public company. They have never had an unprofitable year. American has had stretches of bad times, leading to bankruptcy, in the past. But, more recently, are making money. $7.6 billion in profit for 2015, $4.2 billion in 2014, and so forth.

my_first_acct 10y ago

> Airlines lost those regulations under Reagan. Not really relevant to the main discussion, but I think it is important to make sure readers are exposed to accurate (though perhaps overly detailed) historical information. According to [1] and [2], talk of US airline deregulation began during the Nixon administration, and picked up speed in the Ford administration. In 1975 the US Senate began pushing towards airline deregulation, under the leadership of Sen. Ted Kennedy (not the first politician who comes to mind when you think of reducing government regulation). The Airline Deregulation Act was signed into law by Jimmy Carter in 1978, who already in 1977 had appointed a well-known proponent of deregulation, the economist Alfred E. Kahn, to head the Civil Aeronautics Board (the government agency in charge of regulating airline routes and prices). The Civil Aeronautics Board indeed lingered on until the Reagan administration abolished it in 1985, but the 1978 Airline Deregulation Act is when it effectively lost control. [1] https://en.wikipedia.org/wiki/Airline_Deregulation_Act https://en.wikipedia.org/wiki/Airline_Deregulation_Act [2] https://en.wikipedia.org/wiki/Airline_deregulation#Introduction https://en.wikipedia.org/wiki/Airline_deregulation#Introduct...

bogomipz 10y ago

>Airlines lost those regulations under Reagan" It was actually Jimmy Carter that signed the Airline Deregulation Act, this was in 1978. 3 years before Reagan took office. The transition was complete by the end of the Reagan's first year in office in 1981. I'm not trying to nit pick but for some reason Reagan always gets credit for this.

xapata 10y ago

Airlines appear to have turned that around in the last few years. Full flights and profit.

sbuttgereit 10y ago

Uh... Airline deregulation came to pass under Carter, not Reagan. Yes, that breaks some of the left/right stereotypes that drive modern political discourse... But what can I say? It was a more pragmatic time.

motiw 10y ago

I think they will start making money when they will stop fighting and figure how to do "price fixing"