Taxi establishment to implode spectacularly before our very eyes following Cabcharge’s opening gambit

It’s official! The Cabcharge group of taxi networks has resigned from the NSW Taxi Council/TIA, the South Australian Taxi Council and the Victorian Taxi Association effective 31 December 2016. The announcement came hot on the heels of an article in OZ Cabbie last month headed, “Will Cabcharge ditch ihail and go it alone with its 13CABS app?” predicting the company’s intent to either subjugate or destroy its taxi industry allies. What we didn’t predict was that one of its first moves would be a concerted effort to destroy the industry’s so called peak bodies.

by  Peer Lindholdt

Honour amongst thieves? Not at the top of the taxi industry pyramid.

ihail was to be the taxi industry’s great new weapon against Uber and other upstarts like ingogo and goCatch. It was intended to show that the taxi industry establishment was united and capable of not only maintaining but also growing its dominance of the point-to-point passenger transport market. This was to be achieved partly through its incumbency, partly by cherry-picking the most appealing features of its new-age competitors, be they technological, operational or managerial. It’s said that plagiarism is the greatest form of flattery. The interlopers must be chuffed.

Unfortunately the unity was not to last. According to a source close to the matter the great spoiler was the battle between ‘the traditionalists’ who want ihail to be exclusively for taxis, and ‘the progressives’ who believe the only way to remain competitive and grow their business is to include ‘ride-share’ - aka private hire.

While we can only guess that Kevin Gange, Chairman and owner of Silver Top, is the leader of the ‘traditionalists’, it is abundantly clear that Cabcharge Managing Director and CEO Andrew Skelton is heading the ‘progressives’. Which camp the other network shareholders in ihail: Yellow Cabs and Black and White in Brisbane and Suburban in Adelaide, belong to, is as yet unknown.

NSW plate owners were informed of the split in a letter dated 15 November and signed by NSW Taxi Council President John Bowe and NSW Taxi Industry Association President Brian Wilkins. No official announcement has come from the VTA (Victorian Taxi Association), nor has it informed the industry that its CEO of seven years, David Samuel, when he jumped ship last month, jumped so he could join 13CABS. Equally in S.A., the rank and file has been treated like mushrooms. As for Skelton, he only informed his shareholders at the Cabcharge Annual General Meeting on 24 November. He offered no explanation other than perversely claiming that it would make it cheaper for taxi operators to grow their fleets, which in turn would bring more profit to Cabcharge.

If writing bullshit were an art form, the Bowe/Wilkins sugar-coated letter would be a work of art. For those of you who can’t be bothered to read it, here is an extract: “We remain optimistic that the industry is ably meeting the challenges presented to it and is heading towards a brighter future. We commend all members for their efforts in this regard”.

“Brighter future”? That, in a letter addressed to plate owners who have just lost the shirts off their backs?

Reality is that without the support from 13CABS the NSW Taxi Council/TIA is cactus and so are the VTA and the SA Taxi Council. They will struggle financially until they run out of money and fold. It’s only a matter of time before we start seeing some regional and country networks resigning too and joining the 13CABS brand.

For a taxi booking app to become truly successful it needs to provide services not only in the big cities, but in every town and hamlet with a taxi service, the level of penetration achieved decades ago by phone booking service 131008, a company (Taxi 131008 Limited) owned by its network members. Uniquely, in areas with more than one network only one could become a member, so if you book a taxi in Sydney using 131008 today you automatically get connected to 13CABS. If you book in Melbourne it’s Silver Top and in Brisbane Black & White Cabs. That might have been a great idea in 1992 when 131008 was first established but not in today’s digital age where taxi passengers demand the closest cab regardless of network brand. Ihail has, or had the potential to deliver that. 13CABS does not. Sydney and Melbourne represent around 60% of the Australian taxi market. The Melbourne market is split about evenly between the duopoly of 13CABS and Silver Top, however the

Sydney market is fragmented with 13CABS holding 50%, Silver Top 25% and the balance shared by Legion, RSL, Manly and St George, all of which are small cooperatives and currently members of the Taxi Council.

Will they stay or will they go? Can they survive or will they perish? Will they join ihail or 13CABS or establish their own collaborative app? Will they corporatize and hope to sell out to Silver Top or Cabcharge or someone else? Will they introduce ‘private hire’? The possibilities are endless, but their future looks less than rosy.

What Cabcharge is doing is what it’s always done – divide and conquer. Andrew Skelton learned his street smarts and ruthlessness from his mentor Reginald Kermode, the founding father of the company. Reg had a simple philosophy, “You are either with me or against me, and if you are against me I’ll screw you over”. All we are seeing now is Skelton implementing his mentor’s standover tactics.

Like Messrs Bowe and Wilkins in their letter to NSW plate owners, Skelton in his address to Cabcharge shareholders at the company’s AGM was oozing optimism about the golden opportunities the current challenges (aka turmoil) are throwing up for their company to grow its leadership in the non-cash fare processing space and to make 13CABS the first choice for passengers, operators and drivers. No mention of ihail, however he has revealed elsewhere that Cabcharge has a 10% stake, calling it ‘a small investment’.

Now, why would Cabcharge bother to invest in the ihail consortium when it was already planning to expand and re-launch its own fully owned brand 13CABS in direct competition?

The company is simply betting on both horses in a two horse race knowing it can trip ihail up should it suit its plans. Whether ihail succeeds or fails makes no material difference to Cabcharge. It wins either way. The only threat that truly worries Skelton and his board is Uber - big, arrogant Uber, which is grabbing a bigger and bigger slice of Cabcharge’s fare processing business with a fleet of cars it claims has now reached 40,000 units, double the number of taxis in the whole of Australia.

The stock market values Cabcharge at around $460 million. That is about the combined value of the rest of the metropolitan taxi networks were they put up for sale as a group. Uber Technologies is valued at $US62 billion ($A87 billion) by its investors. Wealth is power.

In FY2016 Cabcharge processed in excess of $1 billion in fare transactions for revenue of $169 million, down 10% on FY2015. Net profit after tax fell by 45% to $25.6 million. It also wrote down the value of its own taxi plates by $27.7 million to $41.2 million.

Given these poor results, launching a ‘divide and conquer’ attack on its own industry by giving the finger its industry associations, whether Skelton considers some of their members laggards or not, doesn’t seem the smartest course of action right now.

Jumping on the ride-share bandwagon appears to be an act of desperation and an utterly counter-productive one at that. It’s a shortsighted fix to a problem, which currently exists only in NSW where the government has put a 4-year moratorium on the issuing of new taxi licences, allegedly at the request of the NSW Taxi Council/TIA. The purpose of this ludicrous idea was to give some protection to the income and assets of plate owners by creating a supply shortage. That that would give Uber four bloody years in which to grow its fleet while the taxi industry stagnates didn’t occur to these shortsighted knuckleheads. Only Skelton, to his credit, voiced his objection to the moratorium. He realised it would give Uber and those in its slipstream a free run whilst diminishing further the taxi industry’s ability to meet customer demands in a timely fashion.

However, it’s not all about getting more cabs on the road so Cabcharge, Silver Top and the rest of the bloodsuckers can earn more fees and sell more fit-outs, insurance and finance packages. It’s about getting fares down to a level competitive with ridesharing. I don’t mean as cheap as, but close enough, say 10% more than UberX, provided of course that taxis maintain the sole right to rank and hail. To achieve that, we need every state governments to bite the bullet and release taxi plates with open entry for $5,000 p.a. and to direct insurance companies to lower their taxi premiums to the same level they are charging private hire operators. In the event that plate owners get their act together and launch class actions against their government for fair and just compensation, that is a problem they should be prepared to deal with if and when it occurs. After all, they created the monster in the first place.

The taxi networks and their associations could have stopped the legalisation of ridesharing in 2014 had they had the intelligence, determination and intestinal fortitude to back and organise the rank and file to bring cities and airports to a standstill for as long as necessary to change our politicians’, the media’s and the public’s infatuation with Uber. The mining industry spent just $20 million to get rid of a prime minister and his mining tax reforms by rallying its workers and launching a highly effective advertising campaign. $20 million would have been a small price to pay to rid Australia of Uber. Instead they are imploding before our very eyes. God forbid that the taxi industry mafia should ever support industrial action even when it’s in their self-interest to do so. •

 
 
 
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OZ Cabbie February 2017

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