At least 250,000 airline road warriors are awaiting word on the future of the nation’s Registered Traveler program, which remains in disarray.

On June 22, 200,000 clients of the Verified Identify Pass (VIP) Clear service learned that the firm had shut down and their $200 annual fees no longer brought them swifter passage through 18 of the nation’s major airports. By mid-July, rivals Unisys/Fast Lane Option (FLO) and Vigilant Solutions had also ceased operations after an investment of over $250 million by the three firms.

But now at least two companies, including FLO Corp. and a California-based investment firm, are bidding to buy Clear’s customer list and re-establish the defunct service, the assets of which are now controlled by Morgan Stanley.

Aside from financial considerations, resurrection of Registered Traveler will also require settlement of issues that mired the airport security program in controversy since the beginning.

The program started out as a public-private partnership with the Transportation Security Administration (TSA) overseeing the various programs and running background checks. But the government security agency backed out of the program in 2008 after “TSA determined that this private-sector program did not provide any additional level of security,” TSA’s John Sammon, an assistant administrator, told the House Subcommittee on Transportation Security and Infrastructure Protection on Sept. 30.

As regards the future of Registered Traveler, a political hot potato, Sammons said: “DHS will continue to encourage interested vendors to work directly with airports, airlines, and TSA to identify and implement worthwhile concepts that will provide registered travelers a benefit, while still maintaining both the level of security needed to ensure the safety of our transportation system, as well as the confidentiality of personally identifiable information. As with any transportation security program, TSA will maintain its regulatory oversight role for any such concepts adopted in the RT program.”

Fred Fischer, principal & managing partner of FLO Corp. told the lawmakers that despite the false start, the future of Registered Traveler is bright.

“Since its inception, 250,000 frequent travelers have found the RT program as the best aviation enhancement to come along in many years… We are now at a crossroads with the RT Program and have the experience and knowledge from the lessons learned over the last several years to move the program forward in an effective manner. The failure of Clear, and their shutdown June 22nd came as a shock to the 250,000 RT members nationwide, to Clear's competitors (FLO and Vigilant Solutions) and to all who had invested in RT,” he testified.

Fischer continued: “Clear's failure, in our view, was brought on by a number of issues: overstaffing at airports, exorbitant overhead, excessive advertising and unreasonable revenue share components to airports including national revenue share, local revenue share and minimum annual guarantees that were not required but used primarily to discourage and eliminate competition. In the end, it was not a lack of capital that killed Clear, it was poor management and an unsustainable business plan. All of these issues can and will be addressed and controlled under a re-launch by FLO, or any competitor.”

Despite the setbacks, Fischer is bullish about Registered Traveler. “FLO has secured significant financing since Clear's failure and plans to re-launch a national program, with or without TSA, at multiple airports in the next thirty days, with additional former RT airports and airports new to RT eagerly awaiting re-launch of the program.

“It is our understanding that multiple parties, including FLO, are analyzing the RT market. It is likely that one of us may ultimately look to acquire certain assets of Verified Identity Pass, including the CLEAR brand, membership lists, and equipment.

“FLO has agreed to partner with a service provider that will give us 1,000 enrollment locations across America, solving what was a serious barrier to greater adoption. Individual and corporate interest in the program has not diminished. The future of RT is bright and the demand for its offerings remains strong,” he stated.

Kurtis Fechtmeyer, the California investment banker, said his investment group, Henry Inc., has signed a letter of intent with Verified and Morgan Stanley to purchase from VIP “certain assets and liabilities associated with the Clear Registered Traveler program.”

Mr. Fechtmeyer’s wife, Alison Townley, also a principal of Henry, testified that “the new Clear will become a successful business, because our marketing and technology expertise and ideas will effectively build on the progress made by Clear to date to meet a very real and often expressed consumer need for air-travel convenience. There is a large and vocal population of travelers who are seeking this kind of opportunity right now. Among them are Clear members who are asking for the service to come back.”

Townley said the voluntary program must be both compelling and economical. “This is best accomplished through a robust public/private partnership. We do not want or need government funds, but we are eager to work with the TSA and our technology partners to deliver a program that is easy to join and even easier to use, while advancing aviation
security.”

She said there is consumer demand for Clear and Registered Traveler, noting that a survey of existing customers found that 70 percent of customers would return to the service if re-launched and an additional 20 percent would return depending on which airports were re-opened. “Understandably, many of them were frustrated about Clear’s shutdown in June, but ultimately they want it back,” Townley believes.

She added: “Before ceasing operations, Clear had made substantial progress towards the goal of a critical mass of customers, with nearly 200,000 active members whose satisfaction with Clear was demonstrated by remarkable renewal rates in excess of 80% even after the economic downturn took hold. Even with available airline seats down over 30%, Clear’s subscriber base increased over 50% in the year before shutdown, and the old Clear was nearing break even.

“But, the market is much bigger. The key to attracting new customers is to deliver a compelling value proposition. That means continuing to provide a fast and predictable experience at airport security, while aligning the nature of the enrollment and membership verification process (and the associated costs) with the nature of the service we’re able to provide,” Townley told the lawmakers.

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