June 9, 2011

Exclusive airport taxi contracts like BWI’s are common and controversial

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By Megan Poinski
Megan@MarylandReporter.com

BWI arrivals roadway

BWI arrivals roadway by Chris Clayson, Creative Commons

Cabbies and cab companies are unhappy as BWI airport  officials seek to sign an exclusive contract to provide taxi service, which the Board of Public Works delayed approving last week. Industry insiders agree that this process can be a headache, but the best way to ensure quality and consistency of service to passengers.

“A growing number of airports are doing it,” said Todd Nemet, president of Transportation Reviews, a consumer advocacy group for airport ground transportation. “And it’s all always very controversial.”

The pending BWI taxi contract has been controversial from every angle. Taxi drivers are unhappy about working conditions, as well as job losses and new fees that may be in store with a new contractor. Long-time Maryland transportation companies are unhappy because their bids were rejected. The current contract holder and others have objections to the proposed new contract because the company owner has been cited in the past for unfair labor practices.

However, Maryland Aviation Administration spokesman Jonathan Dean said that despite the problems presented by the contract renewal, the administration consciously made the decision to continue having an exclusive contract for taxis.

“Our basis for having this was reaffirmed,” Dean said.

Why have a contract?

If they don’t already have exclusive taxi franchises in place, Nemet said that many airports across the country are looking to establish them now. Basically, at an airport with a contract, any taxi can drop passengers off, but only taxis affiliated with designated companies can pick passengers up.

Dean said Baltimore-Washington Airport has had a franchise agreement for its taxis for at least 20 years. It began mainly to establish a high level of service. With an exclusive contract, Dean said, the airport can ensure that there will be taxis to transport passengers whenever they land. They can also make sure that the taxis are in good shape and look the same.

“We have a customer service standard for travelers,” Dean said.
Nemet said that is the most common reason that airports give for establishing exclusive taxi franchises, but not the only one. Environmentally-conscious cities or states could require green vehicles, as an example.

But there’s the other kind of green, too, Nemet said. Many times, municipalities or states responsible for airport operations use an exclusive taxi franchise as a way to raise more money. The government controlling the airport can very easily increase stand fees — a fee per cab to operate at the airport — or raise the amount of money the cab company must pay in order to operate the franchise. Taxi cabs at the Phoenix Sky Harbor Airport once had to pay $200 each per year as part of the franchise agreement, according to stories on Nemet’s site. The most recently awarded taxi contract now requires one taxi company to pay more than $15,000 for each of its vehicles annually.

Raising money is not an issue with the BWI contract, however. BWI Airport Executive Director Paul Wiedefeld told members of the Board of Public Works that the fees paid by taxis are not changing in the new contract.

Problems with contracts

As an observer of the taxi contracting process, Nemet says he rarely sees a contract given without controversy. There are often lawsuits and accusations from losing bidders – who are missing out on extremely lucrative contracts. Sometimes, he said, companies are made to withdraw their bids because management was found to have criminal convictions.

In Salt Lake City, Nemet said, the process has taken longer than it should because a previous request for proposals was cancelled.  In Charlotte, N.C., the city council found out at the last minute that the head of the company they were about to award the franchise was a convicted felon, postponing the April vote until later this month.

The process at BWI has been just as long and controversial. It has taken about two years to solicit and review bids.

Nemet said that despite all of the problems, he feels that exclusive taxi franchises offer the best benefits to passengers and the entities that operate the airport. The main driver behind all of the controversy, he said, is a lack of transparency.

“If they were more transparent in how they choose the franchisees, there wouldn’t be so many problems,” he said.

  • Rmundy

    Mr. Nemet is correct in saying that more and more airports are gravitating to the single concessionaire model for taxi service as a method to improve taxi services.  However, he is incorrect in stating that these concessions are exclusive.  Most airports in North America with taxi concessions permit other taxi companies to pick up by prearrangement.  Thus, while there is a single taxi concession for the airport or a terminal for walk-up taxi customers, other taxi firms also participate at the airport.  Also, the primary motivation for most airport administrations is not to make money off the taxi service but rather to avoid hugh expenses that accompany the open entry airport taxi system.  In the open system, airports usually have to build an expensive facility to house the drivers as they wait for hours on the opportunity to get to the airport curb.  And airport personnel have to dispatch cabs from the lot to the curb, inspect, and manage the cabs while on airport property.  This is a large expense that is typically not covered by taxicab fees to the airport.  Thus, the single concessionaire taxi system is very attractive because it saves money and improves the quality of airport taxi services.  In the case of BWI there is also the need for a taxi management company to split shift the taxis to cover morning and evening peaks.  Taxicab drivers, by taxicab vehicle safety regulations, can only drive 12 hours per day.  This is why a business model that has a sufficient number of taxis which are leased is very important to the airport.  Through leasing the appropriate  number of taxis on 12 hour shifts – some for day and some for night, the airport guarantees that  taxi service of a high quality will be available to the public at all times. 

     Ray Mundy, Ph.D 
    Executive Director, Airport Ground Transportation Association

  • Rmundy

    Mr. Nemet is correct in saying that more and more airports are gravitating to the single concessionaire model for taxi service as a method to improve taxi services.  However, he is incorrect in stating that these concessions are exclusive.  Most airports in North America with taxi concessions permit other taxi companies to pick up by prearrangement.  Thus, while there is a single taxi concession for the airport or a terminal for walk-up taxi customers, other taxi firms also participate at the airport.  Also, the primary motivation for most airport administrations is not to make money off the taxi service but rather to avoid hugh expenses that accompany the open entry airport taxi system.  In the open system, airports usually have to build an expensive facility to house the drivers as they wait for hours on the opportunity to get to the airport curb.  And airport personnel have to dispatch cabs from the lot to the curb, inspect, and manage the cabs while on airport property.  This is a large expense that is typically not covered by taxicab fees to the airport.  Thus, the single concessionaire taxi system is very attractive because it saves money and improves the quality of airport taxi services.  In the case of BWI there is also the need for a taxi management company to split shift the taxis to cover morning and evening peaks.  Taxicab drivers, by taxicab vehicle safety regulations, can only drive 12 hours per day.  This is why a business model that has a sufficient number of taxis which are leased is very important to the airport.  Through leasing the appropriate  number of taxis on 12 hour shifts – some for day and some for night, the airport guarantees that  taxi service of a high quality will be available to the public at all times. 

     Ray Mundy, Ph.D 
    Executive Director, Airport Ground Transportation Association

  • Joshyzelenyj

    Just took a BWI Airport cab home to Bowie, MD, it was crazy expensive. A good $30 more than a local taxi from home to the airport. Who cares if the paint job is the same, no competition is bad for the consumer.