In the high-stakes advanced air mobility (AAM) race-to-market the wheat is now well and truly getting sorted from the chaff, and independent observers like Alton Aviation Consultancy are now seeing with greater clarity how the market will unfold in the next couple of years. The Singapore-based group is actively helping multiple players secure now-harder-to-come-by funding and sharpen their strategies for an anticipated period of consolidation in a very crowded and hyped sector.
“We are starting to see the winners and losers more clearly, and those who are winning are those who can demonstrate that they have cash in the bank,” Alton director Joshua Ng told AIN. “Those that do not have that will have to start demonstrating something really exceptional to prove that they are worth investing in now.”
The Alton team recently published the second part of a white paper assessing considerations for prospective operators planning to buy eVTOL aircraft to establish commercial operations. In its view, what will be telling is not so much which companies get the first of the new vehicles flying with passengers or cargo, but which of them manages to scale their operations to an extent that will sustain growth.
“Look at China [where EHang already has a certified aircraft], it’s very small and it’s not scalable at that rate,” Ng said. “When you get into the hundreds or thousands [of aircraft flying] that is when it starts to get interesting.”
From a situation where several hundred would-be eVTOL aircraft pioneers were vying to break the air transport industry mold, it now seems clear there is a small group of front-runners with a modest chasing pack. “It depends on what the company ultimately wants to do,” Ng explained. “If you want to be an aircraft OEM the window of opportunity is clearly closing, but if you have a good value proposition in terms of battery technology, propulsion systems, or avionics you can still do a really good business if you have your own IP. And we’ll see a lot more of that because you need a supply chain behind the OEMs to make the whole ecosystem work.”
Joby’s acquisition in early June of autonomous flight technology specialist Xwing would appear to be a prime example of how an OEM sees value in adding to its IP portfolio. The eVTOL aircraft manufacturer may yet exploit Xwing’s breakthrough to expand the potential for its vehicles to operate without a pilot on board, but it has not declared a timeline or or plan for any such move.
And there could be more consolidation to come, with major aerospace groups yet to fully show their hand in terms of how they might disrupt the AAM gene pool. “Big companies like Boeing can sustain lower [and slower] levels of activity,” said Ng’s fellow director Alan Lim. “What if one of them buys a company like Volocopter to acquire the IP, as Airbus did with the [Bombardier] CSeries [airliner]?”
Running Out of Cash Runway
In Ng’s view, the tightened supply of fresh capital for AAM could well prove to be a driver of consolidation. “Some people will just not have the cash runway to see it through to certification [of aircraft],” he explained. “It’s not about survival; it’s about finding the right opportunity. Some OEMs could sustain low levels of activity and then catch up, by being patient and achieving entry into service after 2030. But most OEMs are on a less patient path. It’s not about who is the first to market being the winner, it’s the first to scale maybe, and there are pros and cons to being first in this space.”
Then there are questions about how the AAM business model will take shape, and who will provide what in terms of a value proposition. “Batteries are going to be an important part of the value chain for operators,” Lim added when asked about how key assets will be managed. “From an operator perspective, you need the ecosystem to sustain it and one part of that is finance. If you want to get investors to look into acquiring aircraft and leasing them, that part of the equation has not been given enough attention in terms of managing the risk and the value of these resources.”
Lim sees the early years of eVTOL operations as a somewhat tentative state of flux. “What we’ll see is similar to what EHang is experiencing now,” he told AIN when asked about why the Chinese manufacturer still has not secured the air operator certificate it needs to scale up commercial flights more some eight months after it secured a type certificate for its two-seat, fully-autonomous EH216-S vehicle. “It won’t scale up all that quickly; it will be a transitional phase.”
Nonetheless, the Alton team clearly view commercial eVTOL air services as a train that, one way or another, is about to leave the station on time even if the final destination remains somewhat unclear. But is enough being done to get the passengers on board since awareness of the new mode of transportation among the general public seems to be at a very low ebb.
“Word of mouth will be the best way to sell it,” Ng concluded. “In places like New York City you already have seaplanes and helicopters that are doing the same sort of thing as AAM, and eventually the price point [for eVTOL air taxis] will come down. It is going to go down as quickly as it can, as companies figure out how to innovate, just as the low-cost carriers did. And the taxis and train companies will innovate too so that travel costs start coming down for everyone.”