Chicago cabbies say industry is teetering toward collapse

[Tugg Speedman]

Progress?


Chicago cabbies say industry is teetering toward collapse
https://www.usatoday.com/story/news/2017/06/05/chicago-cabbies-say-industry-teetering-toward-collapse/102524634/

About 42% of Chicago's taxi fleet was not operating in the month of March, and cabbies have seen their revenue slide for their long-beleaguered industry by nearly 40% over the last three years as riders are increasingly ditching cabs for ride-hailing apps Uber, Lyft and Via, according to a study released Monday by the Chicago cab drivers union.

More than 2,900 of Chicago's nearly 7,000 licensed taxis were inactive in March 2017 — meaning they had not picked up a fare in a month, according to the Cab Drivers United/AFSCME Local 2500 report. The average monthly income per active medallion — the permit that gives cabbies the exclusive right to pick up passengers who hail them on the street — has dipped from $5,276 in January 2014 to $3,206 this year.

The number of riders in Chicago hailing cabs has also plummeted during that same period from 2.3 million monthly riders to about 1.1 million.

The value of Chicago medallions hit a median sales peak of $357,000 in late 2013, just before Uber arrived on the scene in Chicago. In April, one medallion sold for just $35,000, according to city data.

[dgies9156]

Having advised lenders on medallion values in recent years in NYC, Chicago, Philadelphia, Miami and San Francisco, I have found there is one obvious trend. Prior to Uber and Lyft, medallions were an oligopoly and government regulation was designed to protect the investment of the Medallion holder and the value of the Medallion.

The Medallions were like real estate in San Francisco City: they never lost value. Or so it seemed. The regulation in many cities focused not on convenience and need but on limiting new Medallions, thus ensuring that existing Medallion holders got top value for their assets and that lenders who lent on that value had very little risk.

Uber and Lyft changed everything. In New York, for example, there was a cap of about 13,000 medallions. Fares could rise, Medallion holders could raise lease costs and everyone except the taxi rider was happy. When Uber came, shared rides went from the 13,000 taxis to more than 40,000. So even if the Taxi and Limousine Commission ("TLC") ends up regulating Uber and Lyft, the cat is out of the bag and we'll never go back to a scarcity.

The same is true in Chicago. Service is better and more universal. The losers are the Medallion owners and the banks who over-leveraged Medallions and never required a paydown or pay-off.

[Tugg Speedman]

[dgies9156]

Good luck getting any value in a liquidation.

You're better off modifying and hoping.