AMM: REPORT
AAM: As good as sliced bread?
The advanced air mobility industry finds itself at a crossroads as enthusiasm clashes with real-world reality. What’s the best way forward? Words: Yves Le Marquand
AMM: REPORT
AAM: As good as sliced bread?
The advanced air mobility industry finds itself at a crossroads as enthusiasm clashes with real-world reality. What’s the best way forward? Words: Yves Le Marquand
LISTEN to enthusiasts and you could be forgiven for thinking advanced air mobility (AAM) delivers all the promise of sliced bread. Now the eVTOL dream has turned (at least) a little stale, what lessons can we learn from the past and what’s the best way ahead for this still-revolutionary technology?
In the 9th century everyone got very excited about a new technology that enabled farmers to turn grain into flour more quickly. A torrent of water mill innovations, such as the overshot wheel and gearing systems, promised to transform milling technology and investors poured in.
Then came a trough, as initial excitement met the practical realities of unproven technology and unprecedented infrastructure needs. Investors lost their money and new projects failed. But by the High Middle Ages, the technology was integral to the economy, widely adopted for diverse uses.
This story of hype, followed by despair, before coming of age has been repeated with every technology – from silk to internet search. It is no surprise that AAM is now going through a tough period. But rather than despairing, it’s worth remembering this is what happens after the launch of groundbreaking technology.
“It is a normal evolution of any industry to start with a lot of enthusiasm before hopefuls fall away as the pack thins out,” says Sergio Cecutta, partner and co-founder at SMG Consulting, who leads the firm's AAM. “This industry has a lot of different pieces to it, but, even in the most optimistic forecast, five to seven players are probably enough when you consider regional and urban air mobility, other special use cases etc.”
The past few months have seen European leaders like Lilium and Volocopter both begin insolvency proceedings as they continue to search for further investment.
Both firms had applications for loan guarantees from the German government rejected last year, and it looked as though Lilium was doomed until a group of investors known as Mobile Uplift Corporation (MUC) saved the company on Christmas Eve. The group has promised to invest $205m in the insolvent firm with the transaction expected to close in the first quarter of 2025, This will bring Lilium’s total raise to more than $1.6bn.
Joby Aviation’s eVTOL aircraft prototype on a recent test flight in Japan.
Beta Technologies has installed electric aircraft chargers at 46 sites across the US.
It has been a similar story at Volocopter, despite its aircraft programme being considerably closer to attaining EASA type certification than Lilium’s. The company began insolvency proceedings in Germany on December 26th with administrators immediately beginning an “investor process” to secure fresh capital. Volocopter secured just under $550m in funding by mid-January.
Ben Marcus, co-founder and managing partner at UP Partners, an investor in mobility, says the global AAM industry benefited from some “very loose” capital in 2021. Although that period lasted only 18 about months or so, he believes those who did raise managed to build the war chest required to make substantial progress through certification programmes.
“Will it come back like that? I don’t think so,” Marcus tells us: “Interest rates are coming down and it will get easier to raise again, but I don’t think it is going to return to what we had. We have gone through this trough of disillusionment as Gartner might talk about it. Now we’re in this slow incline of enthusiasm as these machines draw closer to certification and people start to use them.”
Marcus, co-founder of broker jetAviva, also went through a similar period when he was at very light jet manufacturer Eclipse Aviation. “There are going to be a lot of 15-year overnight successes here, where people have been hearing about eVTOLs for a long time and it is not happening. Then, suddenly, I am on an eVTOL from Manhattan to JFK,” says Marcus. “At that point, I think you will see a resurgence from investors. But it will have to be for novel ideas that can build a sustainable competitive advantage in a large market segment.”
As a basic rule, early entrants that tapped capital early – like Archer or Joby – are still managing to find equity investors. “Looking at the West, I do not think we have seen a slowdown in this section of the market. What you are seeing is capital still flowing to the companies that have already raised capital,” says Cecutta. “What I mean by that is many of these companies are developing perfect substitutes, so it is difficult to show up as a startup with an eVTOL concept that delivers anything new. Over in China they are marching to the beat of their own drum.”
Finding finance in Europe is even harder than in the US. “I think as a European startup, you have to expect to be less well funded than your counterparts in the US, so you have to play differently,” says Jean-Christophe Lambert, CEO of Ascendance Flight Technologies, a French startup developing a hybrid-electric VTOL capable aircraft designed for passengers, medical flights and cargo. “Firstly, the cost in Europe is different. HR costs are likely less, you can benefit from partnerships – we have a lot – and we have a good supply chain here in France,” he says. “We have raised between €50m and €60m, which isn’t much, but is enough to allow us to make concrete progress on a flying prototype. This I think demonstrates we can be very capital efficient, which is something investors want to see.”
Cecutta also believes it is hardest to show progress when nearing the end of an aircraft certification programme. “It is a lot of testing at this time and this type of work does not lend itself to press releases as well, but at the same time it is a huge amount of work and investment. This is what I think you see the biggest, most advanced companies doing at the moment. But on the other side of that, I do not see any of the big US firms achieving type certification this year.”
“We have to act as an ecosystem. If one of us passes a critical milestone, it should be helpful for everybody.”
Jean-Christophe Lambert, Ascendance Flight Technologies
Beta Technologies is also developing a conventional version of its Alia aircraft seen here in flight over the US.
Beta Technologies is also developing a conventional version of its Alia aircraft seen here in flight over the US.
A rooftop vertiport concept designed by Volocopter.
The X-P4 Transwing developed by PteroDynamics has a 60nm (111km) range.
An aircraft agnostic waterside vertiport concept envisioned by Volocopter.
Will investors return?
There is a lot of hope that as the first VTOLs become certificated and start flying investors will rediscover the sector.
“I think we have to act as an ecosystem. If one of us passes a critical milestone, it should be helpful for everybody,” says Lambert.
Cecutta agrees. “Yes, type certification would be one of those milestones that would turn attention back at least to the companies that receive it. I don’t know if it is going to reignite interest in the entire industry. In a certain sense, it is going to draw an even starker comparison between the haves and have-nots,” he says. “Right now, anyone can spin their progress positively, once someone achieves a type certification and someone doesn’t, you can’t get more black and white.”
Many investors are also looking to see how paying customers embrace VTOLs. “The eVTOL industry, through players like Joby, has been able to capture the attention of the public with its disruptive concepts,” says Brian Newton, chief financial officer at US-based autonomous uncrewed aircraft developer PteroDynamics. “But when you get to the nitty gritty, the industry has come through a really tough time with Covid, downturns and investors pulling in their horns. We’ve seen these cycles before, such as the so-called nuclear winter after the dot-com boom. I don’t see this current phase as being any different.”
Newton cautions that disrupting existing industries, especially one as tightly regulated as aviation, is not a quick or inexpensive process.
“Investors want repeatable revenue generation, recurring revenues and other things. All those metrics have come back into focus after the heady days of 2021. So, when I look at advanced air mobility, the same pressure is being applied as would be to any industry that has had some inflated investments and valuations at the early stage,” says Newton. “The survivors will be those who sharpened their pencils and are moving on a path toward market adoption.”
Archer Aviation’s eVTOL aircraft in development Midnight.
Beta Technologies vertical lift aircraft variant, aka Alia eVTOL.
Relationships with government are key
The one area that is seeing increased appetite for eVTOL is the military. The US Air Force’s department of innovation has been a key funder of many programmes through its AFWERX programme. It is worth remembering that NASA, which also has supported eVTOL, gave SpaceX early contracts.
“The military is another market that I think a lot of companies have their eye on,” says Cecutta. “It can help support the company through the lull between certifying the vehicle and when the vehicle begins to be produced on a commercial scale. As we know, this is not something that happens one day after another – it could be many years.”
By early 2022 the AFWERX programme broke the $100m mark measured by the value of contracts awarded to AAM companies through its various initiatives. A further $86m was allotted in 2023. Since 2019, AFWERX and SpaceWERX as a whole have executed 6,028 new contracts worth more than $4bn.
The defence link is not exclusive to government grants and contracts (although closely linked). Towards the end of last year, Archer Aviation announced a strategic partnership with US defence unicorn Anduril to develop and produce a hybrid-electric variant of Archer’s eVTOL aircraft Midnight.
Targeting a programme of record from the US Department of Defense (DoD), the project will also form part of the new Archer Defense programme. With a nod to Cecutta’s earlier point that the leaders have stayed raising, Archer secured a further $430m to support the programme. The company has now raised more than $1.7bn since its founding in 2020.
Lambert, at Ascendance, tells us: “In Europe we can certainly have some defence application, but we will not unlock the same funding as the US. The DoD put around $140m into Joby and Archer for a series of flight tests, we cannot have that in Europe, unless we unlock a European defence agreement.”
This is not new. For hundreds of years, governments were keen to encourage milling to help feed their armies. Similarly, AAM should practice patience, says Lambert. “Aerospace was not done in one day, and we are talking about the third revolution in aerospace. It takes time and needs to face difficulties.”
In 50 years these struggles will be forgotten and eVTOL technology will be used in areas no one is thinking about. This is not new. Milling technology led to the invention of sliced bread.
