Expedited airport-security service shuts down

Despite pulling in 260,000 travelers at $199 each, Clear's expedited security-clearance program in 18 airports has shut down.

Verified Identity Pass, which operates the Clear service, said via e-mail and on its Web site that it was "unable to negotiate an agreement with its senior creditor to continue operations." The Clear service was suspended at all 18 airports as of 11 a.m. PDT Monday.

The message to Clear subscribers like myself: "Get back in line."

Ironically, Clear was apparently charging Clear subscribers' credit cards right up until the announcement, as revealed by the commenters to a Los Angeles Times' article on Clear's closure. I guess the company needs every little bit as it heads to bankruptcy proceedings.

Sigh.

Despite signing up for Clear almost from its inception, at first I wasn't a big advocate of the service (though CNET's Dave Rosenberg was). At my home airport in Salt Lake City, the difference between Delta's Medallion line and Clear's security lane was minimal.

But over the past few months, I've had more occasion to benefit from the service, and I can say that I will truly miss Clear. It has saved me from missing more than one flight. I want it back.

It would appear, however, that the cost of maintaining the service exceeds the roughly $52 million in subscription fees that Verified Identity Pass was able to bring in to support the Clear service. With costly biometric scanners and several Clear employees at each security station, it's not hard to see how the costs could add up.

Of course, Clear's various snafus and problems, as ZDNet's Jason Perlow writes, couldn't have helped.

Regardless, I doubt that many will appreciate Clear apparently renewing subscriptions right up until the moment the announcement of its closure. That's bad form. I understand the need to satisfy creditors. But in the age of blogs, Twitter, and Facebook, it seems like an ill-advised policy to charge for a service you're about to shutter .

Expect a backlash.

Clear's announcement via e-mail.

(Credit: Matt Asay)

Follow me on Twitter @mjasay.

[rickboza]

"It would appear, however, that the cost of maintaining the service exceeds the roughly $52 million in subscription fees that Verified Identity Pass was able to bring in to support the Clear service. With costly biometric scanners and several Clear employees at each security station, it's not hard to see how the costs could add up."

Actually - it's quite hard to see. We're talking about 22 airports, two shifts per day with approximately five people per shift. That's 10 employees per airport, plus another five to cover off days and weekends (I'm being quite generous with my staffing). Assuming a very generous comp package of $50K per year, that's $16.5 Million per year for airport operations.

Biometric devices and computers are not THAT expensive. And we're not talking about just $52Mill, you forgot the $44 Mill in VC that Stephen Brill managed to secure for startup costs. Nearly 100 Million Dollars against around $25 Million in ongoing operational costs - something doesn't add up here. How much did Brill pocket? Of course he's already moved on to his next money maker.

I find it incredibly difficult to believe that this system could not be operated for less than $52 Million.

[Matt Asay]

Thanks for the data breakdown. I was trying to be understanding, but you've given me reason to not be such. Give me my Clear back!

[Peter N. Glaskowsky]

Rickboza-- Remember that the subscription fees weren't legally treated like a cash payment to the company; VIP could only recognize the subscription revenue on a month-by-month basis. That doesn't fundamentally change your analysis, but it's a complication that needs to be considered.

You may be greatly underestimating what VIP was paying its people at the airports, or at least the fully burdened costs of keeping those employees in place, possibly including renting space from the airport for a break room or other required facilities.

I'm pretty sure you're underestimating the cost of the equipment; the cost per airport could easily be equivalent to another few full-time employees.

Also, that figure of 260,000 subscribers isn't necessarily describing the number of current active subscribers at $199/year. There's a comment here from a person whose membership came through Marriott Rewards. What do you suppose Marriott Rewards paid for it? Sure as heck it wasn't $199. VIP may have received much less than $199 for the vast majority of those subscriptions.

And how much of the subscription price went to creating the ID and paying other overhead-type expenses?

And then there were the other expenses that the Clear program really needed to incur in order to fulfill Brill's original vision, including special equipment such as shoe scanners. Maybe VIP was spending some of its venture funding and part of the subscription fees to develop this equipment, and had set aside some of the subscription fees to help cover deployment costs.

Bottom line, I wouldn't be surprised if the real, net per-subscriber revenue available to cover operating expenses was down in the tens of dollars per year, which may actually be less than the operating costs of the program.

Remember-- almost every business is more complicated and expensive than it seems from the outside.

Also, see my own three-part series on Clear here on CNET:

http://news.cnet.com/speedsandfeeds/?keyword=Clear

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I just sent this email response to their terse "shutdown" notice back to CLEAR:

"Hey, I know you're pissed off at losing your job and the "senior creditor" who tubed your company, but you ought to understand from the loyal customers' standpoint, BOTH the shutdown and YOUR MESSAGE SUCK.

I want my money back.

I want to know if I have any rights in bankruptcy, whether to file a claim or not.

I want my money back for the gift certificate I bought my son (card hasn't been issued yet).

Clear was a good idea, sorry capitalism sucks; perhaps authorized traveler cards will be implemented by someone else in some future non-recessionary times.


Best wishes in finding a new job,

Sincerely, with sympathy,


J (Also mostly jobless)."

[rolling_mike]

Although Clear was helpful to many it was not helpful to all. In fact, I was unable to see how their service could be made to comply with the ADA and not be discriminatory to those of us that cannot stand on their scanners.

I'm going to check out the LAT article mentioned above, but I'm more than curious to know the identity of the unnamed "senior creditor" who pulled the plug here and pushed the company into bankruptcy.

It would be interesting and relevant to see whether they are one of our zombie banks sitting on public TARP funds so that they can pay their managers the outrageous bonuses they didn't earn for punching their companies and the economy into the ground instead of lending the money out.

[UpajOs]

This whole thing of long security lines could be eliminated by giving passengers carrying concealed sidearms preferential treatment. Then, the flight attendants, after going through the ditching and emergency escape drill, could remind passengers that the person next to them or across the aisle "may" be armed, and that there "may" be one or two Sky Marshals on board, and "Y'all be polite now, ya hear?" Skyjacking would quickly become unpopular and we could get back to flying the way it used to be before D.B. Cooper: People bathed, wore their best clothes and were on their best behavior when flying.

[clamenza]

typical idiocy. Where have all the massacres happened? Curiously hardly ever in gun-control urban areas.

[PoetHunter]

Besides the monetary issue (and yes, I re-upped well ahead of time late last year to save $30), the most troubling aspect of this situation is what becomes of the biometric and other personal data collected from all the Clear members? How do we know that is being safeguarded or that it will be destroyed? Or will that fall into the hands of bankruptcy receivers? That very sensitive database alone must be worth a lot of money.

[Hep Cat]

You'll ind out that in bankruptcy, the assets are sold to the highest bidder.

Your biometrics aren't yours anymore, and became the property of Clear as soon as they were measured. Should've read your contract.

[tivogirl]

I suspect a deal is in the works with FLO Card. If you look at the FLOcard.com airport map, it suddenly jumped from about a dozen airports to more than twice that literally overnight. It also includes every single airport that was serviced by Clear. Looking back at airports serviced previously, it also appears that in some smaller locations (Little Rock, Reno), they were perhaps sharing lanes and equipment anyway. Here in Salt Lake I have never seen a FLO presence, but they now indicate that they service terminal 2 here as an active location, which would seem to verify that the equipment is the same. If that is the case, I hope there is information forthcoming that Clear members will be accepted at FLO locations seamlessly. I don't know how else they could go from having no operation here in SLC to a full-on operation in one day.

[dickanddiane]

Just wanted everyone to know that we are planning on bringing a class action lawsuit against Clear and its parent company. If you are interested in joining us please contact us at [e-mail] . We also were one of the original subscribers and just last month renewed our memberships. Checked our emails and discovered that last late as the middle of May Clear was saying how all was going well. There will be a backlash.

[kbeggs]

Quick note to those of you (like me) that were automatically renewed during the past month or two: if you were lucky enough to use American Express, they are covering this under the dispute-a-charge program. Representative I talked to on the phone said that they are planning immediate refunds to Clear customers that have been recently charged (my charge was from March) and will go after the company in bankruptcy. Great if they migrate us over to the other program, but I think I'd rather have my $179 back just in case.

[Button Boy]

I have only seen CLEAR at one airport I regularly commute to. Never seen it at the arport I commute from though. Since it only impacted less than 10% of my trips in a year, it wasn't worth it to me.

[Magicland]

If FLO has taken over the Clear assets in the airports, it doesn't necessarily mean they've also acquired their customers. Indeed, if they had, I'm sure Clear would have mentioned it in their service termination letter.

I suspect that once Clear decided to throw in the towel, they made a deal to sell their airport assets to FLO, rather than let them be liquidated by the bankruptcy court, so they could pocket the profits instead of turn it over to their creditors. Realistically, the only hope for current Clear customers is if they can file a chargeback on their payments (and do so immediately, before Clear actually files for bankruptcy).

If FLO's management is smart, they'll offer a discount to former Clear users to quickly boost enrollment at their new locations, but unless it's stipulated in the sales agreement when they took over Clear's assets (if, indeed, they did), they're under no obligation to do so.

[tivogirl]

It doesn't matter if Clear's customers get transferred to FLO officially or not. If they take over the Clear checkpoints, Clear customers can use them. According to TSA rules, any Registered Traveler (RT) program must be accepted by another competing RT provider. So if you go through an airport with FLO or any other type of RT lane, you can still use your Clear card. They would be required by law to recognize and accept the Clear card until its expiration. All the information is vetted via TSA through their system regardless of which RT you use.

[cjwray]

Biometric data is not an asset that can be legally or ethically sold by Clear. Clear has an obligation to dispose of this data properly. Their terse one-page web site has added a section about 'personal information' It reads, "Applicant and Member data is currently secured in accordance with the Transportation Security Administration?s Security, Privacy and Compliance Standards. Verified Identity Pass, Inc. will continue to secure such information and will take appropriate steps to delete the information." (See www.flyclear.com.)

In the Clear Privacy Policy, it states that the Transportation Security Clearinghouse also has possession of the biometric data (but not your name) to prevent fraudulent enrollments under alternate identities. The information is supposedly encrypted as well. Clear is already in enough financial hot water, I don't think they would risk federal lawsuits for being careless about mishandling biometric and other personal information, but you never know. The lost laptop incident is reason for alarm.

[Been_there_Saw_it_before]

If you paid with a Credit Card (not an ATM card), just tell the bank the charge is false and let the bank honor their gurantee against on-line fraud. The bank will get the money back for you.

[dickanddiane]

Just spoke to Cindy Rosenthal, who was Clear's media relations person, and it turns out she was laid off in March, but Clear kept sending out news releases into May with her as the contact. She says Flo Card always had all the Clear airports listed on their map because the cards were interchangeable. Have started to receive emails about the class action lawsuit. Our email address is [e-mail] if interested in joining lawsuit.

[Aprildog]

My husband and I renewed
our membership two weeks ago.
Surely the company knew at the
time that they were in financial trouble.
Is there some legal recourse? This behavior, in my mind, is fraudulent .

[cjwray]

If you paid by credit card, contact your bank immediately and dispute the charges. I recently renewed too, disputed the transaction, and my bank has issued me a credit. Lot less painful than legal action. Let your bank do the heavy lifting.

[vmccoyjr]

I consider myself lucky. I got a free 1 yr. membership though Marriott Rewards. I had just gotten an email last week from Clear saying it was time to renew and to consider a multi-year membership. Luckily I had not acted.

[Bill_I]

Another great idea that just won't fly.

[UpajOs]

clamenza wrote on June 23, 2009 3:08 PM PDT:
" typical idiocy. Where have all the massacres happened? Curiously hardly ever in gun-control urban areas."

Tell it to the people of Tehran, Iran. Tell it to the parents and family of Neda Agha-Soltan, an innocent young woman massacred in the street by official gun-toting government thugs in an urban area with 100% gun control, where no civilian is allowed to own, much less carry arms. Now, what was that you were saying about idiocy?

[Peter N. Glaskowsky]

I think Clear was poorly conceived and executed, offering little value for the money and arguably reducing security in some of the places the Clear program was operating. For more information, see my three-part investigative series here on CNET:

http://news.cnet.com/speedsandfeeds/?keyword=Clear

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[sjgh3]

Chimicles & Tikellis is investigating a potential class action lawsuit against Fly Clear and Verified Identity Pass, Inc. on behalf of consumers that have purchased ?Clear Card? services from Fly Clear. Clear Card is a service sold to travelers that expedites the security screening process at airports, and costs approximately $199 per year. Clear Card was in use at airports such as Albany, Denver, San Francisco, and Orlando International Airport. According to its website, Fly Clear has ceased its operations as of June 22, 2009, and its Clear Lanes are no longer available. According to the Clear Card website, Fly Clear will not issue refunds to consumers.

If you have purchased a subscription to Fly Clear?s Clear Card services, please contact the attorneys below.

Attorneys to Contact:

Benjamin F. Johns ([e-mail])
Matthew D. Schelkopf ([e-mail])
361 West Lancaster Avenue, Haverford, PA 19041 Phone: [phone]