Road sharing with ride-sharing leads cab cooperative to bankruptcy

When it comes to getting around San Francisco, students have wide range of options. Despite filing for bankruptcy Friday, the city’s largest taxicab co-op, Yellow Cab Cooperative Inc., remains one of those options.

Though many students surmised SF Yellow Cab filing for bankruptcy reflects the burgeoning app-based ride-sharing market, pointing to companies like Uber Technologies Inc. and Lyft Inc., many were unconvinced this means the end for the city’s traditional taxicabs.

“(Yellow Cab) is facing some stiff competition from ride-share programs,” said English student Katie Brandt, 26, who is getting her master’s degree. “But I don’t think they will be obsolete any time soon.”

Brandt said she uses both Uber and Yellow Cab, and the deciding factor for which one to choose depends solely on convenience in that given moment. When outside an airport or night club, she can simply walk up to a taxi and go, no app necessary.

“I don’t even have to take my phone out,” Brandt said.

Others, such as 21-year-old hospitality and tourism major Melia Shimabukuro, said they prefer app-based services for their convenience and value.

“Uber and Lyft feel a lot safer than a cab, and they are definitely cheaper,” Shimabukuro said. “For me it’s easier to take out my phone and use the app, and then a driver is there within minutes.”

Shimabukuro said she bases her judgment on past experience and that erratic driving and a lack of conversation between her and cab drivers shaped her distaste for taking taxis.

“I know way more people who use Uber and Lyft than taxis,” she said. “I’m surprised, but not that surprised (that Yellow Cab SF filed for bankruptcy).”

Business Insider reported that at the DLD Conference in Munich last year, Uber CEO Travis Kalanick revealed that San Francisco’s taxi market is about a $140 million per year business, while Uber’s annual San Francisco revenues were $500 million per year. Uber’s San Francisco revenues were reported growing at a rate of 200 percent annually, and the number of its rides was anticipated to triple each year, according to the article.

But SF Yellow Cab is hanging in there.

Yellow Cab SF communications consultant Bob Cassinelli said that between the co-op’s roughly 2,000 drivers and more than 300 owners, everyone has a different take on the bankruptcy situation, but the co-op and its constituents are optimistic and believe it can emerge from its debt.

That debt, Cassinelli said, is nearly $32 million – the result of multiple lawsuits filed against the cooperative for past automobile accidents.

One important thing to note is SF Yellow Cab filed for Chapter 11 bankruptcy under federal tax code, which allows a debtor to reorganize its business instead of facing liquidation, according to the IRS Internal Revenue Code.

“A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time,” assistant professor of economics Venoo Kakar said in an email. “People in business or individuals can also seek relief in Chapter 11. Creditors cannot try to collect debts or sue the debtor during bankruptcy. They could emerge from bankruptcy.”

Cassinelli said that while Uber, Lyft and other ride-sharing services may have had an impact on Yellow Cab’s revenues in recent years, the cause of the filing is directly related to tort liabilities incurred during a time when the co-op was self-insured. A tort liability is a legal obligation of one party to a victim as a result of a civil wrongdoing or injury.

Although self-insuring once allowed SF Yellow Cab to save money by reducing its premiums, it also left the co-op at risk of incurring huge losses, which is inevitably what happened, he said.

“We are sometimes painted as a casualty of these ride-sharing apps, and that is just not the case,” Cassinelli said. “The game isn’t over. Nobody is singing yet.”

Uber did not return interview requests as of press time, and Lyft declined to comment.

As of last week, figures show SF Yellow Cab provides an average of 15,000 fares daily, or roughly 5.5 million fares annually, he said, adding that in the last six months more and more drivers have been “trickling back in.”

“We hired nine new employees on Friday (the day of the Chapter 11 filing announcement),” he said.

Yellow Cab has even entered the smartphone app game to vie for the ridership of those accustomed to getting around using ride-sharing apps. Known as the YoTaxi app, it was made available to the public at the end of December and features card-on-file payment options so riders never so much as have to pull out their wallets to pay, much like Uber and Lyft, he said.

cab with cityReid Cammack / Xpress