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.
Matt Asay brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. Matt is vice president of business development at Alfresco, a company that develops open-source software for content management. He is a member of the CNET Blog Network and is not an employee of CNET. Disclosure. You can follow Matt on Twitter @mjasay. 
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.
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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"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)."
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.
Your biometrics aren't yours anymore, and became the property of Clear as soon as they were measured. Should've read your contract.
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.
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.
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 .
" 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?
http://news.cnet.com/speedsandfeeds/?keyword=Clear
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- by sjgh3 June 28, 2009 7:35 PM PDT
- 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.
- Like this Reply to this comment
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(26 Comments)If you have purchased a subscription to Fly Clear?s Clear Card services, please contact the attorneys below.
Attorneys to Contact:
Benjamin F. Johns (BFJ@chimicles.com)
Matthew D. Schelkopf (MatthewSchelkopf@chimicles.com)
361 West Lancaster Avenue, Haverford, PA 19041 Phone: 610-642-8500