Air Taxi Market: Taking Flight - Future of Transportation

The Rise of Electric Air Mobility

Just over a decade ago, Joby Aviation began as a small operation with only seven engineers, operating from the ranch of its founder, JoeBen Bevirt, located in the Santa Cruz mountains.

Currently, the company has grown significantly, employing 800 individuals and achieving a valuation of $6.6 billion.

This positions Joby Aviation as the most highly valued company focused on electric vertical take-off and landing (eVTOL) technology within the sector.

A Growing Field of Competitors

Joby isn't alone in achieving a 'unicorn' valuation. The air taxi industry is rapidly expanding.

Numerous new companies, and those planning to become publicly traded through mergers and special purpose acquisition companies (SPACs), are emerging.

Strategic alliances between major automotive manufacturers and established airlines are becoming increasingly common.

Company executives are projecting the commencement of commercial operations as early as 2024.

Challenges and Uncertainties

Like any nascent and disruptive industry, predictions regarding the future of eVTOL are subject to uncertainty.

Online discussions, particularly on platforms like LinkedIn, demonstrate disagreements among industry professionals and analysts.

These debates center on the realistic timeline for widespread adoption and the identification of future market leaders.

Legal Disputes and Valuation Concerns

Significant disputes are also unfolding. Wisk Aero has initiated legal action against Archer Aviation, alleging the misappropriation of confidential trade secrets.

Furthermore, the valuations of companies currently generating no revenue – and potentially not for a considerable period – are experiencing substantial increases.

Looking Ahead

The momentum behind electric air mobility is undeniable.

However, the path forward is not without potential difficulties and periods of instability.

Some turbulence is anticipated as the industry matures and evolves.

Significant Investment and High Costs in eVTOL Development

The progression of an eVTOL (electric vertical takeoff and landing) aircraft from initial design to full-scale manufacturing and regulatory certification is projected to require approximately $1 billion. This estimation was provided in April 2020 by Mark Moore, formerly leading Uber Elevate, during an Agility Prime program conference hosted by the Air Force.

Consequently, the companies poised for success within this emerging sector will likely be those that have effectively secured substantial funding to cover the extensive costs associated with engineering, obtaining certification, establishing manufacturing capabilities, and building necessary infrastructure.

“The ability to secure, or already possess, considerable capital to navigate the certification process will be the primary differentiator between thriving and struggling startups,” stated Asad Hussain, a senior mobility technology analyst at PitchBook, in an interview with TechCrunch. “With over 100 startups currently involved, not all will be capable of achieving this.”

Consider the research and development expenditures of leading eVTOL companies last year. Joby Aviation invested $108 million in R&D, representing a $30 million increase compared to 2019. Archer allocated $21 million to R&D in 2020, as indicated in regulatory filings. Joby reported a net loss of $114.2 million, while Archer’s net loss totaled $24.8 million; however, it’s important to note that neither company has yet launched a commercial product. Operational costs are anticipated to continue escalating as companies transition into manufacturing and deployment stages.

These financial realities suggest two likely trends for the industry’s future: an increase in SPAC (Special Purpose Acquisition Company) deals and a rise in mergers and acquisitions.

Companies focused on mobility solutions, particularly those developing electrified transportation, frequently operate without revenue and possess capital-intensive business models. This combination often presents challenges when seeking traditional buyers through an initial public offering (IPO). SPACs have gained popularity as a more streamlined and cost-effective route to becoming publicly traded. Historically, SPACs have also faced less rigorous oversight than IPOs. However, increased scrutiny from the U.S. Securities and Exchange Commission regarding SPAC mergers could potentially limit the ability of other air taxi companies to access public markets in this manner, Hussain explained.

Therefore, market consolidation appears almost inevitable, as smaller companies may determine that selling their assets is more advantageous than continually seeking additional funding. This trend is already underway; in late April, Astro Aerospace announced its acquisition of Horizon Aircraft.

Horizon Aircraft cited “improved access to capital” as a key benefit of the acquisition, and other companies will likely find that being acquired or selling their business is the most viable path to commercialization. Recently, Vertical Aerospace, a British eVTOL manufacturer with an order for 150 aircraft from Virgin Atlantic, announced plans to go public through a merger with Broadstone Acquisition Corp., valued at approximately $2.2 billion.

While substantial capital raising is a crucial indicator, other metrics also present complexities.

The Financial Landscape of eVTOL Development

The eVTOL industry demonstrably requires substantial capital investment. However, securing funding represents only a portion of what investors evaluate. They are also keenly observing which companies are progressing efficiently through the flight certification process and successfully establishing partnerships with well-established transportation and logistics organizations.

Such collaborations, exemplified by Beta Technologies’ April announcement of a potential delivery of up to 150 eVTOL vehicles to UPS for expedited services, serve as strong indicators of project viability and competitive positioning.

Strategic Investments from Automotive and Aerospace Giants

Both automotive manufacturers and established aerospace firms are increasingly directing investments towards emerging air taxi companies. This influx of capital can significantly accelerate growth by providing access to specialized knowledge in large-scale manufacturing and component sourcing.

Bevirt communicated to investors in April that Toyota, a key investor in Joby, is actively collaborating with Joby’s engineering teams. Similarly, Volocopter, a German eVTOL developer, has attracted investments from both Daimler and the Chinese automotive company, Geely.

Key Investor Considerations: Leadership and Vision

Michael Pye, an investment manager at The Baillie Gifford U.S. Equities Fund, explained to TechCrunch that their investment decisions regarding Lilium and Joby were also influenced by specific qualities exhibited by the companies’ founders and management teams. These included a long-term strategic outlook and demonstrable expertise in aeronautical engineering.

“We prioritize management teams that demonstrate a long-range perspective,” Pye stated. “During a conversation with Daniel [Wiegand] of Lilium, we inquired about the possibility of selling aircraft to private buyers. He firmly dismissed the idea, emphasizing Lilium’s commitment to making electric flight universally accessible.”

Navigating the Risks of Partnerships

While partnerships offer significant benefits, they are not without potential drawbacks. Archer, one of three eVTOL companies pursuing public listing via SPAC mergers – alongside Joby and Lilium – garnered attention with a $1 billion order from United Airlines.

However, a filing with the SEC revealed that this agreement encompassed all current aircraft orders and remained contingent upon further negotiation and mutual agreement on crucial terms.

• eVTOL: Electric Vertical Take-Off and Landing
• SPAC: Special Purpose Acquisition Company
• SEC: Securities and Exchange Commission

The Critical Role of Infrastructure

Following the construction and certification of these aircraft, the availability of convenient and easily accessible vertiports is paramount for customer access to the service. The importance of this infrastructural component to the success of the aerial ride-sharing market cannot be overstated. Companies are beginning to address this challenge, though much remains to be determined.

A degree of discretion is understandable given the competitive landscape, but substantial infrastructure development will be necessary, both immediately and in the future, to meet projected deployment schedules for eVTOL companies and external developers.

David Wyatt, an analyst at IDTechEx and author of a recent report on air taxis, explained to TechCrunch that achieving “mass mobility” requires “sophisticated” air management and vertiport design. This is to effectively handle a high volume of aircraft operations.

Archer’s co-founders, Brett Adcock and Adam Goldstein, have indicated a willingness to utilize existing facilities, such as helipads and parking structures, initially following their planned 2024 launch in Los Angeles and Miami. An Archer representative confirmed to TechCrunch that the company is “actively engaged with public and private partners” regarding its aerial ecosystem, though specific details are still forthcoming.

Lilium publicly unveiled proposed vertiport designs in April, aiming “to help make vertiports accessible to developers large and small.” This provides a preliminary view of potential future vertiport layouts.

Joby Aviation recently announced a partnership with a major parking garage operator to develop its vertiport network, signaling a concrete step in infrastructure build-out. Furthermore, Joby’s head of air operations, Bonny Simi, stated that “[Joby] will be on the Uber app” alongside its own dedicated application.

Securing exclusivity on the Uber platform would be a strategic advantage for Joby, potentially providing a significant competitive edge.

Future Projections for eVTOL Aircraft

Numerous eVTOL (electric vertical takeoff and landing) companies have issued optimistic forecasts regarding their future performance. Archer, for instance, anticipates achieving an annual revenue of $2.2 billion by the year 2026, with Joby Aviation presenting comparable projections.

However, the realization of these projections is contingent upon the schedule for commencing commercial operations. Significant discrepancies exist in estimations concerning this timeline. While the underlying technology is mature, Wyatt posits that widespread availability of air taxi services for public transport may not occur until the following decade.

Hussein suggests a potential “timeline reset” is likely, as investors may be underestimating the intricate technological and regulatory hurdles associated with widespread adoption, as detailed in his recent report on air taxis.

Morgan Stanley Research has similarly cautioned investors to moderate their expectations. A research paper published in May 2021 highlighted the underestimation of risks related to aviation regulatory requirements.

Certain air taxi developers have offered more definitive predictions. Both Joby Aviation and Archer have publicly stated their intention to initiate commercial operations in 2024, while Lilium aims for a market launch as early as 2025.

Moore, now serving on Archer’s advisory board, believes these more immediate timelines are achievable. He expressed “high confidence” that at least some aircraft will be both certified and in production by 2024, deeming this outcome “very realistic.”

Despite varying timelines, substantial investor commitment remains evident.

Pye emphasized the long-term nature of transforming an established industry like aviation. He stated, “Ultimately, this industry…it’s going to take a long time and it’s going to be very hard.” He further indicated a desire to provide the sustained financial support necessary for success.