In California, car-rental startup faces lawsuit

Associated Press


Out of a tiny, green shack on a parking lot in an industrial area south of San Francisco International Airport, three teenagers are trying to change the airport car rental business. To do it, all they need are your cars, and strangers to drive them.

Their company, FlightCar, rents out people’s cars while they are traveling, and gives them a share of the proceeds, free airport parking and a car wash in exchange. And their lot has had a few unusual rentals, including a 2001 Porsche Boxster and even a Lotus.

“How does it make sense that there’s one parking lot at the airport where there are thousands of cars sitting there and people are paying for them to sit there and do nothing, and there’s another parking lot with thousands of cars owned by Hertz?” 18-year-old FlightCar CEO Rujul Zaparde said.

Zaparde and co-founders, Kevin Petrovic and Shri Ganeshram, both 19, created FlightCar, passing on elite colleges in the Northeast and joining others in what has been dubbed the “sharing economy.” These new businesses are trying to make it easy for people to share their property — such as cars or houses — and earn some money.

These companies are, however, also running up against government regulations. In FlightCar’s case, San Francisco city officials and those at the airport say the company is undercutting rental car companies at the airport by acting like a rental company but ignoring the regulations that govern them.

“We’re simply trying to enforce a consistent standard,” said Doug Yakel, an airport spokesman.

The city has filed a lawsuit against FlightCar, hoping to shut it down until it complies with the regulations, including conducting pick-ups and drop-offs at a special area, paying 10 percent of gross profits to the airport and paying a $20 per rental transaction. The central question in the lawsuit against FlightCar is to define exactly what type of company it is.

FlightCar’s founders say they are not a traditional rental-car company. Yakel said FlightCar is like Hertz or Avis because it caters to the airport’s customers and draws most of its revenue from passengers flying into the airport. That means FlightCar needs to follow airport regulations for rental companies, he said.

As the lawsuit proceeds, FlightCar’s business is growing. Since the company’s operations started, the number of car drop-offs has climbed from 600 in mid-May to 1,000 a month later, said Rosally Sapla, a FlightCar spokeswoman. The number of rentals went from 1,000 to 1,400 in the same span.

The company — which attracted private investors — employs about 30 in San Francisco and Boston and while it has not yet become profitable, Sapla said, she expects it to be in a couple of years.

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