With headlines dominated by recent minimum wage hikes forcing ridesharing companies out of cities, it is easy to forget the other regulation that ridesharing companies continue to be targeted with. Airports nationwide have been levying additional fees and American consumers are paying the price.
From Boston Logan International Airport in Massachusetts to John Wayne Airport in California, a large number of American airports (nearly all of which are government-owned) have increasingly decided to levy fees – specifically pick-up and drop-off fees – on ridesharing services. Airport officials argue these fees are necessary to fund infrastructure maintenance and reduce traffic congestion. Not only are these claims disingenuous, as the low elasticity of demand for ridesharing services suggests raising fees would not reduce traffic, but they also produce a wide range of unintended consequences for consumers, drivers, and the economy in general.
First, ridesharing fees distort market prices by adding additional charges to Uber and Lyft rides. While airports argue that these charges are relatively small, airport officials regularly increase them whenever they deem necessary. For instance, Lehigh Valley International Airport in Norristown, Pennsylvania recently voted to charge Uber and Lyft a $2.50 fee on every ride to and from the airport, up from $2.00 previously.
Ridesharing fees are also counterproductive for the gig economy workers who get less take-home pay as a result. For instance, Uber already keeps up to 25 percent of the profit generated from a ride and the driver receives whatever is left, after accounting for fees and vehicle wear and tear.
There are also serious doubts about whether the money raised by ridesharing fees is used for its intended purpose. While airport authorities frequently claim that these fees are necessary to pay for ridesharing-related infrastructure maintenance, in a concept known as “cost recovery,” this money can be used for whatever authorities want. This is an enticing proposition for airports looking for new revenue streams and none of the drama associated with traditional tax increases. Indeed, evidence suggests that these fees will only become more important to airports in the years ahead.
Perhaps the biggest unintended consequence of airport fees is that, in practice, they often mean choosing winners and losers in the consumer market. This is because these fees are frequently not applied to alternative forms of ground transportation such as airport shuttles, buses, or even personal vehicles – each of which also utilizes airport infrastructure but pays nothing.
Even when these fees are applied to alternative forms of transportation, such as to taxis, it is often at a different rate. Orlando International Airport charges ridesharing companies $7 per trip while only charging taxis $4. That is despite there being a Florida state law that requires airport ridesharing pickup fees to be consistent with those fees charged to taxis. In some cases, airport authorities have been openly colluding with the taxi industry to regulate ridesharing companies, such as was the case with Hillsborough County. This unequal treatment puts a thumb on the scale in favor of legacy transportation services, services which, in many cases, are not consumers' preferred mode of transportation.
Ending these practices will require airport authorities to treat all transportation services equally and be willing to scale down less popular options should weak consumer demand require it. It will also require lawmakers to take a more active role in drafting legislation to prevent airports from levying fees on ridesharing services without first obtaining public approval. Taking such steps will not only improve transparency but also enhance consumer welfare by removing unnecessary fees that make air travel more expensive.
