Nasir Pasha & Matt Staub

Why The Government Is Trying To Shutdown The Uber For Flights [e227]

The guys kick off the week by discussing why the Federal Aviation Administration shutdown a startup trying to be the Uber for flights and how the company is trying to fight back.

Transcript:

NASIR: Hello! Welcome. That’s how I’m going start to our podcast from now on. No, welcome to our podcast where we cover business in the news and add our legal twist. My name is Nasir Pasha.
MATT: And I’m Matt Staub.
NASIR: I was thinking, like, I feel like I’m starting a phone call so I have to say hello and you have to say hello.
MATT: Does that happen on a phone call? Both people say hello? I think it’s just one, right?
NASIR: No, I don’t know. I thought you say hello and the other person says hello back, no? I guess that doesn’t happen.
MATT: You call me, I would say, “Hello,” and you wouldn’t go, “Hello.” You would say…
NASIR: That’s true.
MATT: At least I don’t think so. I guess you could.
NASIR: I may start doing that but it might get confusing and they may think it’s a question like, “Are you there?”
MATT: In the days of answering machines, the best one I ever came up with was, you know, it would ring and then there must have been a beep or else it wouldn’t work but the answering machine would start and I would just say, “Hello?” and I would wait, like, ten seconds, and then I would say, “Sorry, we’re not here right now…” you know, whatever, and so they would be like, mid-sentence into talking because they thought someone was answering.
NASIR: Those were the worst. So, you were one of those guys, huh?
MATT: Unfortunately. I mean, I guess you could do it with voicemail, but I think there’s too many beeps and noises nowadays where I think it wouldn’t work.
NASIR: Yeah. I remember I used to, on voicemails on cell phones, I would get caught on that too with people like you.
MATT: Most people text nowadays so phone calls are a thing of the past.
NASIR: I usually text “hello” first. “Hello! Are you there?”
MATT: That’s a good way to start and then I write back, “Hello.”
NASIR: And then, I start talking. “How are you?”
MATT: So, I don’t know if you’d heard about this. I hadn’t heard about this company prior to reading some of these stories or seeing this lawsuit.
NASIR: No, I haven’t. For some reason, I thought it probably exists because it’s almost obvious now but I didn’t know the actual company.
MATT: I’m assuming they’re called Flytenow. That seems like that makes sense but…
NASIR: Well, I’m pretty sure they just misspelled “flight.”
MATT: Problem number one.
NASIR: But I do think that’s how it’s pronounced.
MATT: Well, that’s how they were able to go under the radar for a little bit before the FAA shut them down. Maybe they were just searching flight-based companies.
So, Flytenow, it’s an I guess you could call it a flight sharing company – something like Uber or anything in the sharing community is obviously really big right now.
NASIR: Yeah.
MATT: The difference being that a lot more people have driver’s licenses as opposed to a pilot’s license so it’s a little bit different.
NASIR: Yeah.
MATT: How it worked and I believe it looks like it is still up and running. Is it still up and running?
NASIR: Well, it seems like their website’s up and running but then, on some of their releases, they say they have suspended operations. Maybe their marketing is such that they haven’t. 7
MATT: I mean, just getting to that, they started this company, this flight-sharing company where basically pilots and non-pilots could get together and go from one destination to the next and possibly a round-trip too but just essentially sharing the costs of that so kind of an everybody wins situation. The Federal Aviation Administration, the US government agency, basically said, “Well, this is unacceptable,” and they shut it down. That’s why I was wondering about whether it was still up and running or not. They shut the website down but the site is operating. I haven’t tried to book a flight to see if it actually – or I guess you weren’t booking a flight – haven’t tried to share a flight with someone to see if it works or not. So, Flytenow has sued the FAA and this happened…
NASIR: Back in January I think, right?
MATT: But the actual US Court of Appeals was September 25th so very recent as we’re recording this and I think they said it was going to take a couple of months at least to get a decision but, you know, Flytenow was at least optimistic that they were going to get the decision in their favor.
NASIR: Yeah, by the end of the year. And so, what they utilize is an FAA rule that probably no one except pilots are aware. Okay. Obviously, there’s different rules if you’re piloting actual passengers and advertising for that – that’s different. But, if you’re a private pilot and you’re going from one city to another, you can post on a bulletin board and say, “Hey! I’m going to this place. If you want to come too, why don’t you give me some money and we can help share with some of the costs associated with that.” It seems like a really easy way to kind of hop on a ride somewhere and I don’t know how expensive it would be but I assume it would be obviously much cheaper than hiring a private jet to do so.
MATT: Yeah.
NASIR: What they did is took this bulletin board in all these different small airports or however they physically do it and put it on the internet. All of a sudden, the FAA says – and, according to Flytenow in their very typical government fashion without kind of going into the details or reconsidering their regulations – just said, “No.” That’s really what they’re fighting. Basically, they’re saying that this is a totally outdated law or regulation and it’s also not being interpreted correctly and this is infringement on the First Amendment because really they’re just attacking the manner for which they’re advertising it and replacing the bulletin board with the internet.
MATT: Yeah, and that’s the weird thing. From what I’ve read, this has been around, these cost-sharing flights have been around since the 1960’s and the FAA has had no problems with it up until this last year when basically, like you said, someone took this bulletin board and put it online – like most things have been done these days by now – and that’s when the FAA came in and said, “Oh, actually, now that we think about it, we don’t like this.” To me, it just says that probably most people didn’t know about it up until this site went up and that’s when the bigger airlines or the commercial airlines were possibly losing out on some customers. It’s kind of like the taxi thing with Uber – how all the taxi cab companies and drivers have gotten so upset about this competitor now in a space where there was little competition in the past.
NASIR: Yeah. Here’s what’s a major difference – well, I don’t know if it’s a major difference because it’s kind of similar. What’s the argument of why you need to regulate the taxi companies versus Uber drivers and so forth? Some of it is tax or a profit incentive for the city, but some of it is safety related. But, here, I think this is where the safety-related aspect of the sharing economy really comes into play because the problem with these small planes and these private parties is that they don’t have the same kind of regulatory standards and requirements that are given to common carriers like a commercial airline. Whether they have small planes or big, they have to go through a little bit more of a higher standard and I have no idea what those are because I’m not a pilot but I do at least have that understanding. But one thing I do know is very clear is that the insurance policies, the limits are compared to the requirements of these commercial liners don’t even come close in the sense that these private small jets are actually, I don’t know if people know this but you’re very likely to get into an accident compared to getting into a car accident. Car accidents are already a pretty high casualty event for most people which is why we pay a lot for our insurance but then compare that to these small jets. Small crashes here and there are, again, it’s relatively common. I’m not saying, you know, majority of the time, they go down but, if you want to do some comparisons there, it’s definitely higher risk.
MATT: You got that more likely to have a car accident than flight based on Dumb & Dumber, the opening scene, right? Where he’s driving her to the airport in the limo?
NASIR: No.
MATT: Lloyd turns around and he’s like, “You know, it’s ten times more likely you’ll get into a car crash on the way to the airport than actually in a flight,” and he’s not even looking at the road, swerving all around. But – you’re right – I mean, just think about it. When you hear about a plane crash, I mean, most of the time, it’s these small jets and there’s probably instances where you don’t even really hear about it at all but it’s very rare that a big jet is going to be in a crash where people end up dying from it so you are right in that aspect and at least Flytenow is saying, “Well, we don’t fall under this common carrier because the pilots that are involved in this model are not looking to turn a profit,” possibly not even making a profit, period, I guess is more so their argument and, because this is the case, it’s more, you know, it’s a non-commercial transaction and that’s why this expense-sharing should be allowed. We’re going to hold these pilots to the same standards as commercial airlines for that reason.
NASIR: Yeah. I was just trying to look up, I know I saw a story on this and they kind of mentioned the risk of having a small plane accident versus a car accident and the percentages was much higher in a small plane. Of course, I can’t find that statistic so I guess just believe me. Is that the alternative?
MATT: I think it’s well-known.
NASIR: Is it well-known? Yeah, I don’t know.
MATT: But people are way more terrified to fly on a plane than ride in a car.
NASIR: I don’t know if I was making it clear. Do you understand? I’m saying that small planes are… Wait, are we on the same page or no?
MATT: Yeah, yeah, no, you said two different things and I’m agreeing with both of them.
NASIR: Oh, okay, I’m confused. I’m sorry.
MATT: Yeah, no.
NASIR: You were nodding, I wasn’t sure.
MATT: No, I agreed with both so don’t worry. Other than this, one of the bigger things about this, it seems like it might turn on is what Flytenow is calling the means of communication and how this information is getting out there. I mean, it’s 2015. Pretty much everything’s online nowadays. You kind of said at the beginning, “I’m surprised this didn’t exist prior to 2014.” But, I mean, to me, I don’t really see a change in how things were allowed to be done for decades as opposed to now where anyone can do it. My thought was that it’s just more people know about it so that’s why the FAA is upset about it now because it’s going to affect more people as opposed to the past where probably people really didn’t know about this unless they were small pilots or knew someone that was a pilot.
NASIR: I think that’s the key point that the FAA is making, too. They’re defining Flytenow as a common carrier – or I should say the pilots who participate in this – and, curiously, I guess there’s no statutory definition of a common carrier but apparently the FAA has interpreted it to basically be defined as “an air carrier that undertakes to provide interstate or foreign aircraft transportation to passengers as a common carrier for compensation to the public.” I think that’s the key thing here is that holds it out to the public or a segment of the public is a little bit different because, when you’re putting it on the internet versus on a bulletin board which is in a small airport that may not be to the public, so to speak, I would say, if the airport is readily available to anybody to enter wherever that bulletin board is, it’s the same thing. It’s just a different amount of people, right?
MATT: I don’t even really get why the FAA is so concerned about this. I don’t really think it’s going to affect too many… I understand commercial airlines are having difficulties in general.
NASIR: I think it’s safety. I think that there’s a legitimate argument on how there’s different regulations for common carriers, there’s different protections for passengers for common carriers, and you’re not going to have that in these small cost-sharing flights.
MATT: Oh, no, I’m agreeing with you. I’m just not even sure why the FAA even cares about this in general. I just don’t think it’s going to affect that many affect.
NASIR: Oh, I see what you’re saying. I think what happened was they just said a no because it was easier for them to say no but they’re being sued and now they have to fight it and make an example out of it, I suppose.
MATT: Yeah. In that common carrier issue, if you go to Flytenow – and I’ll link there – they have actually put a really good summary up on their blog but they narrow it down to three main issues and that common carrier one’s really the meat of it. The other two seem more procedural or possibly even a misunderstanding between the parties on this pilot certification issue. I think that’s what it’s going to turn to, you know, we’ll find out and I guess it does say the site shut down on August 2014 or at least being able to book or actually use it. The site is still up and running – I’m on it right now – but actually use the features of it.
NASIR: I would totally consider doing this. This seems pretty neat.
MATT: Well, I mean, to me, it’s all going to come down to price.
NASIR: Yeah.
MATT: It has to be cheaper.
NASIR: You’re just sharing the cost so, yeah, it has to be. I mean, cheaper compared to just paying a pilot in a small plane to fly you. I don’t know if cheaper compared to a commercial airline.
MATT: Yeah. I mean, I’m looking on their FAQs and it says, as an example, a round-trip adventure from Boston’s Hanscom Field to Martha’s Vineyard in a Cessna 1782 may cost around $120 per person.
NASIR: Okay.
MATT: I have no idea if that’s good or not but it seems all right.
NASIR: Wait. That’s from where? From Boston to…?
MATT: Martha’s Vineyard.
NASIR: Oh, I have no idea either. I mean, the last time I was in Martha’s Vineyard was, I don’t know, just two weeks ago so I can’t remember that far.
MATT: What’s your favorite airplane-themed movie? Don’t say Airplane.
NASIR: I was going to say Airplane.
MATT: It’s a good choice, but…
NASIR: Airplane, either Snakes on the Plane which I’ve never seen but I just think is just the premise is just so funny or there was Air Force One. Was that the name of the movie I think it was? That was pretty good.
MATT: Yeah, there’s Air Force One, there’s Con-Air.
NASIR: Oh, that’s the worst movie. In fact, I think I like it less because it seems to be just always on and I’ve watched it a couple of times.
MATT: What about Top Gun?
NASIR: Top Gun is not all in one plane – at least the majority of it.
MATT: Oh, it had to be something that was on one plane? Okay.
NASIR: Yeah, that’s the rule. You just made it up.
MATT: All right. Well, that’s fine. Well, I think you actually did a pretty good job. That was good choices.
NASIR: Well, there’s not that many. I think we named all of them.
MATT: Snakes on a Plane.
NASIR: All right. Well, thanks for joining us.
MATT: Yeah, keep it sound and keep it smart!

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