ROME – In a market darkened by the oligopoly of giant players, a small aerospace manufacturer makes its debut on the NYSE in a race against time. Its ticker symbol is JOBY, which is also the actual name of the company, headquartered in Santa Cruz, California (Alamalhodaei, 2021).
After being selected to collaborate with NASA on several ground-breaking electric flight projects, Joby now aims to enter Urban Air Mobility. The product currently being tested by the startup is the eVTOL S4, an all-electric aircraft that can take off and land vertically.
Last year the company also agreed to a “G-1” certification basis for its aircraft with the FAA and was granted the first-ever eVTOL airworthiness approval as part of the U.S. Air Force’s Agility Prime program (Joby, 2021).
Undoubtedly the urban model is a new vision of aviation. Today’s airport is designed for the outskirts due to the enormous space required by the aerotropolis, the pollution, and the noise of aircraft engines.
The model most similar to that proposed by Joby is the helicopter, which however wasn’t born for the city, rather as a patrol and rescue vehicle (ie, Sikorsky R-4), especially because it has become unpopular among urban communities due to its noise.
Nevertheless, if earnings will outweigh the operating costs, Joby’s eVTOL is likely to replace light helicopters in the near future. The so-called zero-emission aviation doesn’t equate to zero-cost, bearing in mind that electric aircraft under development generally have lower performance than fuel-powered ones.
Joby is no exception. Its air taxi has a range of 150 nmi (278 km) at a speed of 200 mph (322 km/h) and can carry up to 4 passengers. In comparison, the fuel-powered helicopter Robinson R44, designed in the late 1980s, can travel 300 nmi (556 km) at a maximum speed of 150 mph (240 km/h), carrying up to 3 passengers.
The R44 beats the Joby on the range but loses on capacity and speed. However, if we consider larger helicopters, such as the Bell 429 or Leonardo AW109, both single pilot, the capacity rises to 6-7 passengers, the range is considerably higher than the Joby (270 nmi) and the speed around 300 km/h.
The startup told investors the S4 has 4 times lower operating costs than a helicopter in a 25-mile trip, giving numbers $95 versus $393 per mile (Joby, 2021).
It’s arguable, however, that the aircraft picked for the comparison is the Sikorsky S76, maiden flight in 1977, which has higher operational costs than both Bell 429 and Leonardo AW109, already high! (AircraftCostCalculator, 2021).
The biggest challenge of Joby thus becomes to build customer acceptance which must be shaped on the innovation of the product and not so much on the tangible convenience of an electric aircraft, unless crushing of operating costs turns out to be incomparable.
Joby has the opportunity to make its way in a portion of corporate travel by introducing itself as an intermodal solution. Just imagine a bizjet landing in a large airport (i.e., LAX).
A Joby’s aircraft operator could guarantee connection to places relatively close to the field, such as Downtown Los Angeles, Hollywood, and Orange County. A mode of transport faster than road and more sustainable than a helicopter.
On the official website, Joby shows the aircraft would be able to travel LAX-Newport Beach in 15 minutes.
This path is confirmed by the incorporation of the eVTOL Uber Elevate division which has done an intensive job on demand modeling and will help Joby to define the right network in terms of skyports, routes, schedules, and intermodal transport from the Skyport (Hader & Baur, 2021).
The startup is betting on three values: safety, noise (in line with time), and cost-effectiveness (Hader & Baur, 2021). Joby’s market segmentation is a niche, namely people who haven’t been touched by the price-sensitive shift of the air market. For a wealthy customer, the quality of travel will always prevail over price.
Nevertheless, the biggest concern seems to be the noise. Since the startup intends to focus on Urban Air Mobility, it’s mandatory to minimize the noise of overflight in densely populated areas.
On this matter there are still question marks, the simulations are immature and because aircraft are electric doesn’t mean they are automatically quiet, considering that the rotation of a blade generates a noise. Finally, the urban context cannot fail due to excessive noise because it constitutes Joby’s promise to reduce travel times.
In its investor presentation, the company assumed that the S4 has an acoustic signature of 65 dBA, a helicopter of 93 dBA, and a lorry of 90 dBA at 100 meters distance (Joby, 2021).
To recap, there are a few points that could clarify Joby’s position.
How much would a flight in a four-seat eVTOL single-pilot aircraft cost? It’s a million-dollar question. According to Joby, the S4 would cost much less than a helicopter ($95 vs $393 per mile, see above), but they are all hypothetical figures.
On the eVTOL, there’s still a pilot and the fossil fuel is replaced by an undefined electricity expense.
The company expects each aircraft to cost $1.3 million to manufacture and also projects to generate $2.2 million in revenue. In 2026 every aircraft would fly 7 hours a day and spend 12 hours in operations or 2,300 hours a year and 4,500 hours in operation, with an average load factor of 2.3 passengers per trip (Joby, 2021).
Who are Joby’s competitors? At the moment no other company has reached the advanced stage of Joby, except for Archer Aviation.
Santa Clara-based air taxi startup, which aims to launch a 12-rotor all-electric aircraft by 2024, went public via SPAC Atlas Crest Investment (NYSE: ACIC) last February. But the sand of the hourglass is speeding up.
Joby is losing shares on the NYSE because the story stock should be integrated with a concrete product for clients, in this case, expected by 2024. Indeed, the company had no revenue and minimal operational expenses, but over the past year still managed to incur a $128 million loss due to “non-operating expenses” (Smith, 2021).
Joby expects to burn roughly $1.1 billion from 2021 through the end of that year, meanwhile, it laid out a plan to build credibility by delivering (Bogaisky, 2021).
Who is Joby’s buyer persona? Although the company promises “increasingly affordable urban air mobility over time”, it appears clear that customers will be well off, in fact, the same ones who can afford a trip on a helicopter.
The company based its ideal customer evaluation on the following key criteria: population density, travel distances, and congestion, per capita GDP, existing infrastructure, airport origin, and destination traffic, and the presence of the 1,000 largest American companies ranked by revenues (Fortune 1000) (Joby, 2021).
It’s hard to predict future demand. A low supply of eVTOL aircraft could lead to increased operating costs. In order to meet a supposed demand, Joby is planning an initial production of hundreds of aircraft per year, and it’s also working with the Department of Transportation to select a couple of cities to begin commercial operations (Hader & Baur, 2021).
As a key assumption, the company stated that in 2026 an average of 963 total aircraft will be built, of which 850 in the service segment (Joby, 2021).
References:
- AircraftCostCalculator. (2021). https://www.aircraftcostcalculator.com/default
- Alamalhodaei, A. (2021). Joby Aviation makes its public trading debut on the NYSE. TechCrunch. https://techcrunch.com/2021/08/11/joby-aviation-makes-its-public-trading-debut-on-the-nyse/
- Bogaisky, J. (2021). Electric Air Taxi Maker Joby Goes Public, Offering Investors Sky-High Potential – And Risk. Forbes. https://www.forbes.com/sites/jeremybogaisky/2021/08/11/joby-stock-spac-nyse/
- Hader, M. & Baur, S. (2021). Urban Air Mobility: Successfully Combining eVTOL Vehicles with Demand Modelling Data. Roland Berger. https://www.rolandberger.com/en/Insights/Publications/Urban-Air-Mobility-Successfully-combining-eVTOL-vehicles-with-demand-modelling.html
- Joby. (2021). Commercializing Aerial Ridesharing. https://drive.google.com/file/d/1KViIZufQAZ7Q8T7vh79VIuHVW-nZp3CN/view
- Joby. (2021). Official website. https://www.jobyaviation.com
- Mozée, C. (2021). The SPAC taking electric-aircraft maker Archer public has slashed the valuation of the company by $1 billion. Markets Insider. https://markets.businessinsider.com/news/stocks/archer-aviation-valuation-1-billion-spac-atlas-crest-evol-united-2021-7
- Smith, R. (2021). Why Joby Aviation Stock Popped Today, Then Dropped. The Motley Fool. https://www.fool.com/investing/2021/08/17/why-joby-aviation-stock-popped-today-then-dropped/
