On November 8th at Web Summit in Lisbon, Uber Chief Product Officer Jeff Holden used his full twenty minutes with thousands of journalists and tens of thousands of attendees to detail the company’s plans for … flying cars. Given the year Uber is experiencing, it might be understandable for Holden to try to divert attention away from some glaring issues. But Holden was deadly serious and added significant details to Uber’s previously announced plans to introduce a local air taxi service. Holden announced that Los Angeles will join Dallas-Fort Worth and Dubai as pilot cities for the Uber Elevate service test in 2020. That’s the year that arrives in 25 months.
Uber Elevate Concept Air Taxi
Uber is working with NASA and several aerospace and property development partners to get the pilot project off the ground. The schedule is no less aggressive than the pricing strategy Holden announced for the air taxi service: Uber Elevate will be price competitive with Uber X when it launches. That’s right: if you pick the right destination, you could ride in a VTOL aircraft for the same price as being ferried around in a hipster’s Prius.
Realistically, there are a host of issues to work through in a short time. NASA was enlisted to create an air traffic control system that could allow liftoffs from numerous building rooftops without hindering commercial aviation or endangering the public. Finding suitable real estate for the launch pads and building a reasonable system for automating the check-in process are both potential stumbling points. And perhaps as daunting as all of these challenges combined is designing a new type of aircraft. This is something that Bell Boeing and the U.S. armed forces had a great deal of difficulty with during the 25 years between the initiation of the experimental project for the V-22 Osprey and full-scale production. Like the Osprey, this new craft will need to take off like a helicopter but fly with the efficiency of an airplane. Unlike the Osprey, it will need to do so with unparalleled reliability at a competitive commercial cost. And be significantly quieter than helicopters. And be adequately powered by multiple electric engines.
To be fair, Uber has some high profile partners, including Boeing, Bell Helicopter, Mooney and Embraer. And it is not surprising that a transportation company the size of Uber is looking to the skies for growth. Along with Elon Musk’s hyper-loop project and a handful of other mass transit gambits, the airspace over urban areas is one of the few remaining possibilities for transformational growth in urban mobility. But the timeline seems impossible. Unless it isn’t.
Realistic or not, the project represents a significant diversion of resources for Uber, even in the short term. The question is, why is Uber pursuing this so hard? Is it simply the unrealistic nature of a Silicon Valley unicorn? Or perhaps that’s not the right question to ask.
Instead of wondering how Uber can afford to pursue this plan, it may be fairer to ask whether they can afford not to. The reality is that Uber is an untenable strategic position that shows no signs of improving in the short-term. After years of enjoying unlimited growth and hobbled competition, the service is losing some of its structural and technological advantages. Reaching for the skies may be an attempt to find another temporary monopoly.
Uber’s Terrible, Horrible, No-Good, Very Bad Year
Uber in the past year has looked like a sprinter with a ten lengths lead who trips and stumbles near the finish line. The company has been besieged by a series of crises, from failing to renew its operating license in the city of London to the forced withdrawal of co-founder Travis Kalanick, all while facing an increasingly difficult struggle to avoid being classified as the legal employer of 160,000 or more Uber drivers.
Uber also faces significant competitive threats on the horizon. Lyft, which is reportedly just a quarter of Uber’s size has gained share on the giant in the past year and is notably unburdened by the scandals that Uber has faced. Lyft has a more PR friendly public face (now that it has lost the unseemly car mustaches) and some driver-friendly policies to boot.
Black Clouds On The Horizon
Taxis and black car services represent more of a threat than they’ve been to Uber in years. Part of this has to do with driver unhappiness over Uber’s labor practices and the relatively low barriers for them to work for other employers. But a more significant threat looming on the horizon is disintermediation: the idea that with blockchain transactions, individual drivers could use freely available software to replicate the Uber service complete with Yelp-like ratings of both drivers and passengers.
Uber is also jockeying with Lyft for position in the upcoming transition to driverless cars. Both companies are pursuing autonomous fleets of self-driving cars, but they’re behind Waymo (which is part of Alphabet, the Google parent company). Waymo CEO John Krafcik announced on November 7th (also at Web Summit) that the company launched a self-driving test fleet (using Waymo employees as passengers) at the beginning of this year in a Phoenix suburb. Krafcik also announced that the company will soon remove the human backup drivers from the cars and open the trial to the general public. It appears that Waymo will beat Uber to the autonomous car future.
And it’s not even clear that any of these companies will be the eventual winner when driverless vehicles arrive in greater numbers. The common theory is that driverless cars will be owned in fleets, not by individuals. Car manufacturers (knowing full well the implications that reducing their millions of existing customers to just a handful might have for their operating margins) are also working hard to create their own part of this future. Both Porsche and Volvo have created driver programs that work much like cellphone plans: riders pay a flat fee that covers both the vehicle and insurance and are able to swap out the individual cars frequently, or even at whim.
Maybe the Air Isn’t So Thin Up There After All
In this context, Uber’s sudden fixation with the skies makes more sense. If Uber believes that the economics can work, then taking part in the regulatory and logistic creation of the structure of a new industry is a smart play. Uber can effectively lock in an early-mover advantage by working with NASA, real-estate developers and aerospace companies the same way that Tesla has by setting up battery charging points around the country and investing heavily in battery technology.
It’s too soon to say whether Uber’s plans will succeed or fail. But the company's motivation is rational and the need is great. With some luck, Uber’s passengers — and its prospects — might just soar in 2020.