The much-hyped advanced air mobility (AAM) industry is facing a reality check as development costs for new eVTOL aircraft have increased at a time when available capital seems to be contracting. This was a clear point of consensus among analysts assessing the state of the precocious new sector of aviation in the opening session of the Revolution Aero conference in London this morning.
“The unfortunate reality is that it takes a lot of money to develop these aircraft, and the most recent calculations show that it takes more like $1.5 billion [per program],” said Sergio Cecutta from SMG Consultancy. He pointed out that this estimate represents a 50% increase over the $1 billion figure that has been a commonly accepted benchmark as recently as last year.
Other independent experts focused their attention on what they view as deficiencies in the electric propulsion technology that is foundational to AAM. A trio of consultants—Lewis Cronin from the UK’s Aerospace Technology Institute, Oscar Watkins from ICF, and Siyi Hao from Roland Berger—echoed the belief that the current generation of battery technology is not sufficient for viable eVTOL use cases.
“We’re not there yet with propulsion,” Hao commented while pointing to possible breakthroughs with solid-state batteries. “The automotive OEMs are incentivized to develop batteries for their mass market, and what they have now is good enough [for electric cars]. But they are less interested in [developing new batteries for] the aviation market, which is much smaller.”
Both Watkins and Cronin argued that prospects for electrifying larger aircraft for scheduled airline operations are more compelling in the long run. Both pointed to the need for further investment in hybrid-propulsion technology as a pathway to hydrogen propulsion, which, Hao added, will need an assured way to mass-produce the fuel in a sustainable way using techniques such as electrolysis.
Hao also identified air traffic management infrastructure as an area requiring significant further investment to support AAM operations. “The current VHF-based systems just won’t be able to handle the level of communications needed for the eVTOL aircraft,” he told the Revolution Aero audience.
Addressing the perceived drying up of funding sources for AAM startups, Watkins pointed to recent cash injections for eVTOL aircraft developers like Lilium and suggested that companies will have to explore new sources. “We’re seeing companies with enough cash for around another two quarters [of development work] and also the value of the SPACs [initial public offerings] coming down a lot,” he commented. “There is still some private money out there, but the cost of the capital is much higher. And there is also still a lot of public money that hasn’t been taken advantage of.”
Adam Forsyth from UK-based Longspur Capital echoed that perspective on the industry’s urgent need for more funds. “There is no doubt that private equity [funding] fell slightly in 2023, and public equity finance has dropped too but it’s not dead.”
For Lewis, his optimism is founded more on hopes for the longer-term impact of new technology and manufacturing processes on the wider aviation industry. In conclusion, he advised the AAM sector to brace for a wave of consolidation among the dozens of players still trying to get to market.