CLEAR Secure's Big Bet Could Save Airport Travelers a Lot of Time

Over the last 20 years, Clear Secure, Inc (YOU) has tried, failed, tried again and ultimately succeeded in shaking up the airport security line. But now Clear is making a bold bet that it could be even quicker.

It would know. After being founded in 2003, filing for bankruptcy in 2009, relaunching in 2012, and going public to tepid fanfare in 2021, the company is finally bearing down on $1 billion in last 12 months bookings. It's down 35.6% since its offering.

Substantially all of that has come from the healthy niche it has carved out in airport security, which has been buoyed in part by a partnership with American Express  (AXP) , which has seen it become a core benefit of its flagship Platinum Credit Card. Membership discounts with U.S. carriers have also pushed forward the $209 per year subscription, which offers access to a dedicated security line with CLEAR kiosks.

There, a CLEAR agent will scan your boarding pass, direct you to a kiosk for a photo of your face, and then another agent will guide you to the front of the TSA line where you'll be screened by a TSA agent. 

It has become a convenient way to "skip the line" at 60 U.S. airports. If you're lucky, the whole process could take less than a minute; even faster than even TSA PreCheck on occasion.

Lines could start moving along even faster, though. In August, the identity verification company announced that it would pilot new eGates in three host cities for the 2026 World Cup: Seattle (SEA), Atlanta (ATL) and Washington, D.C (DCA). 

In recent weeks, they've also added New York City's John F. Kennedy International (JFK) and LaGuardia Airport (LGA), part of a push to expand the eGates to more key markets nationwide.

Per a statement, CLEAR heralded the product launch as the start of a "new era of frictionless travel," adding that "CLEAR+ Members can now verify instantly and go directly to bag screening, unlocking a truly frictionless path from curb to gate." 

The new eGates could make CLEAR significantly faster, eliminating one key complaint of CLEAR users: that it isn't much of an improvement over TSA PreCheck or Touchless ID. But those complaints might go by the wayside, as eGates open up a lane specifically for CLEAR users. 

The CLEAR Catalyst

If it's everything CLEAR says, it could take just a few seconds for somebody to be cleared in to screening. And best case, it could require less staff to run, eliminating the company's second largest cost center.

Seek out a CLEAR checkpoint the next time you're at an airport; count those manning the kiosks, scanning your boarding pass, providing instruction, and moving you along to the TSA agent. It's certainly not just one or two people at most major airports. 

eGates could reduce the need for excess agents. Better yet, free them up to make more money for the company with add-ons like its new paid Concierge product, which will let you skip the CLEAR+ line ($99 per use) or take you from curb to gate ($179 per use).  

I think it remains to be seen if there's appetite for paid add-ons, especially since many customers are getting CLEAR+ for free. However, maybe there's an appeal in the so-called "luxury travel" business for a wealthy enough person to skip the "skipping line," or have somebody carry your bags for you. We might be surprised by the success of this "add-on" product. 

But regardless, eGates offer optionality for the company. And with a healthy 23.5-plus price-to-earnings ratio, a modest dividend and profitability, it might desire a closer look from investors.

What's the Risk?

CLEAR has faced its fair share of challenges in airports. For one, it pays money to airports to have its lines there. Two, security questions. And three, the big questions about whether CLEAR still demonstrates a durable advantage over TSA PreCheck in a world with Touchless ID.

Take them all with a grain of salt, but with some weight.

Revenue Share Fees Remain High

Starting from the top: CLEAR paid $31.2 million in "revenue share fee" to airports. These are accrued either on a variable rate, a percentage of new sales from the airport or on a pay-per-use basis. It varies from airport to airport; so too do leases on the space. 

These are negotiable and some airports are more demanding than others. But at 14.2% of its expenses, that's not nothing. It could also well increase in the future, especially if the company continues to do as well as it has been doing.

Security Status

When you run a security-oriented products, you are bound to have the occasional security issue. CLEAR has had a few, which have elicited concerns from regulators about controls at the firm.

The outlay of this mistake is that CLEAR kiosks have presented random ID checks more and more, in some cases, to a point where it could become slower than PreCheck. This could also happen on the eGates, too.

There is the risk that eGates are not transformative. That would be a problem for CLEAR, in large part because of the next factor.

The Value Question

Finally, CLEAR has sort of waned in popularity and trust among frequent travelers, who point to the (already quick and quickening) TSA PreCheck line.

Ultimately, CLEAR's advantage comes from speeding up the "ID verification" part of security. However, the launch of the TSA's own Touchless ID feature has impeded on CLEAR's competitive offering.

It's not the only impeding factor on CLEAR. Many people enroll to skip the security line. But increasingly, states are weighing laws which would make it so CLEAR customers wouldn't be able to skip the line. eGates help circumvent some of this impact, but there are still big questions.

The largest among them might be whether CLEAR customers, many of whom receive their membership as a courtesy from a premium credit card, would pay for it if we were talking about a minuscule difference in line time.

What Are We Waiting For?

I'd venture to believe that a wider launch of eGates is the most exciting catalyst for CLEAR, even as it makes a late entry into enterprise biometrics with its new CLEAR1 product. 

The company has made efforts in the past to emerge beyond airport security, corralling its advantage with physical biometric verification, but it doesn't look like these edge cases are ready for primetime. 

I suppose that some of the know your customer (KYC) and biometric verification software that CLEAR has been playing around with is an interesting option that comes with its core business. There are obviously some interesting use cases, but at this stage, it's hard to see it as a significant contributor to revenue in the near term.

For now, rolling out eGates and freeing up agents is the thing most likely to move the needle for CLEAR.