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LONDON – Back in February 2021, United Airlines, through its partnerships with Mesa Airlines, announced strong support for eVTOL start-up firm Archer Aviation with an order for 200 of its flying taxis.
This order, when announced, was seen as something as a little peculiar, especially given the COVID-19 pandemic taking hold on finances across the industry. But with that in mind, the airline is still moving ahead and planning for the future, especially to increase revenue streams.
Such analysis is going to look into Archer’s plans for the future, as well as the benefits it holds compared to the current infrastructure cities around the world currently have.
Orderbook Part of a Wider Interest
United CEO Scott Kirby said at the time that this is how the airline aims to combat global warming “by embracing emerging technologies” (United, 2021).
“By working with Archer, United is showing the aviation industry that now is the time to embrace cleaner, more efficient modes of transportation. With the right technology, we can curb the impact aircraft have on the planet, but we have to identify the next generation of companies who will make this a reality early and find ways to help them get off the ground,”
“Archer’s eVTOL design, manufacturing model and engineering expertise have the clear potential to change how people commute within major metropolitan cities all over the world.”
The investment into Archer is part of the airline’s wider commitment towards innovative technology helping the reduction of Carbon emissions.
United was an “early stage investor in Fulcrum BioEnergy and recently partnered with 1PointFive, a joint venture… to jumpstart the establishment of direct air capture and sequestration technology” (ibid).
The Archer Perspective
The investor presentation (2021) released by Archer contained a lot of significant information about how the company aims to proceed, not just over the decade, but beyond that as well.
The company has recently secured a deal with Atlas Crest Investment Corp. who will be pushing the growth of this company, with its missions being “to partner with disruptive world-class companies undergoing transformational growth” (ibid).
Atlas Crest can tell that Archer will disrupt the market, especially with the highly accomplished team in the company already, collectively bringing together 200+ years of eVTOL experience.
The deal, which is due to go through in the next quarter will represent a $2.7bn valuation of the company already, which is based on 2026 revenues and EBITDAs, highlighting great promise in the next five years.
Such a valuation was helped by Morgan Stanley back in December 2018 when it mentioned that the Urban Air Mobility market could be valued between $1.5-3.0 trillion by 2040 (TransportUp, 2018).
A breakdown of this addressable market is seen through the following categories:
- Shared Mobility – $674bn
- Airlines – $177bn
- Cargo – $413bn
- Military & Defense – $12bn
- Key Accelerants – $198bn
Such strategic deals with the likes of United will enable Archer to tap into this market as quick as possible, especially with the cooperation around FAA certification, airline flight connections, pilot and maintenance crew training etc.
Cost Benefits
Through its Maker aircraft, it will cost operators around $3.30 per mile, which is amazingly less per passenger mile compared to UberX.
The aircraft will offer a range of 60 miles at 150mph, which enable trips that are 10 times faster than a car.
Examples noted by Archer consists of San Jose to San Francisco at 17 minutes compared to an hour and 40 minutes via UberX and two hours and 21 minutes via Caltrain.
Another was from New York City to John F Kennedy International Airport, of which would take seven minutes with Archer compared to one hour and 25 minutes on UberX.
Noise emissions will be considerably low, offering 45DB of sound from a cruise altitude of 2,000 feet, being 100x quieter than a helicopter.
With its options to diversify into the different segments listed, it will provide more revenue streams as it will be significantly cost-effective to fly.
The revenue benefits compared to the likes of Ride Sharing firms are significantly exponential and could cause a shift in approach by the likes of Uber, Lyft and others.
The Next Decade…
Archer’s strategic timeline began in 2018 when it began plans to build up a team of personnel with significant experience in the eVTOL market.
Between then and 2020, it has begun proceedings in acquiring FAA certification for the aircraft.
2021-2024 will see the manufacturer demonstrate the aircraft to authorities, with them already securing a Department of Defence airworthiness certificate.
The same period will be a focus on its sales program in trying to acquire more orders before achieving certification by 2024.
2024-2027 will look towards the more financial side, gearing up for a free cash flow breakeven by Q425.
It will begin delivering aircraft to partners and launching aerial ride sharing businesses in U.S cities.
Finally, between 2027-2030 will see the autonomous version of the aircraft launched and will see a more global approach to launching, with particular focus in Europe, Middle East and Asia.
Competition
From what Archer has dictated to investors, whilst the manufacturer remains positioned to dominate the market, its main competitor will be Joby Aviation, who are also working for certification in the U.S at the moment.
The only difference so far is the contracted order book and its mass manufacturing design complexity, but all it takes is for Joby to make different positive gains to become a further threat for Archer.
Such mass manufacturing is of course key to Archer’s success, especially with its production targets between now, 2026 and beyond.
2021-2026 will see between 200 and 1,000 aircraft produced per year, with the big leap taking place in 2026 and beyond with up to 5,000 aircraft being produced yearly.
With the aim of being remotely supervised by 2028, it appears that this may be the right strategy to take, especially with mass manufacturing being utilised in case any problems arise during deliveries and production.
The Infrastructure Needed
Landing and take-off infrastructure location remains a part of Archer’s product and business strategy, as it will be likely that a new hub to base the eVTOLs will be needed.
However, given the size of the aircraft, and its ability to operate 25 daily flights at the most, there will be some connectivity between current infrastructure and new infrastructure.
Such changes will be made, especially due to airspace management and the aircraft operating at lower, typically VFR altitudes.
But with the use of United and its connections within the FAA, this will be something that will be tight-knit and closely coordinated as we progress throughout this decade.
A Belief in the Long-Game
While we may not see the successes of eVTOL come to proper fruition until the end of the decade, there is a strong belief from the likes of United Airlines in planning for the future.
For now, the likes of ride sharing apps such as Uber and Lyft will benefit in the short-term, as it will take a considerable while for the infrastructure to be established, which is why such companies are comfortable presently.
With United “taking its most ambitious step yet in leading the fight against climate change: pledging to become 100% green by reducing its greenhouse gas (GHG) emissions by 100% by 2050”, it shows the high-level of commitment to achieve this and will try to cut emissions where it can, even if it means cutting out car journeys (United, 2020).
Such commitment will also make the level of competition in this market severely complex in its nature, with automotive companies such as Toyota and Daimler looking to get its hands into this sort of business.
An important question to pose is this: “Which of the eVTOL companies will become the leader in the market? And from that, does it mean aerospace is better at producing for this market, or will the automotive industry create a new gap in what is a saturated market?”
We won’t properly know this answer until the start of the next decade, and with that comes a long time to wait. But it is something definitely exciting for this industry.
References
- United (2021), United to Work With Archer Aviation to Accelerate Production of Advanced, Short-Haul Electric Aircraft, https://hub.united.com/2021-02-10-united-to-work-with-archer-aviation-to-accelerate-production-of-advanced-short-haul-electric-aircraft-2650426294.html [Last Accessed 25th February 2021]
- Archer Aviation (2021), Investor Presentation, https://investors.archer.com/files/doc_presentations/Investor-Presentation.pdf [Last Accessed 25th February 2021]
- TransportUp (2018), Morgan Stanley Predicts $1.5 Trillion Market for Urban Aviation by 2040, https://transportup.com/headlines-breaking-news/infrastructure/morgan-stanley-predicts-1-5-trillion-market-for-urban-aviation-by-2040/ [Last Accessed 25th February 2021]
- United (2020), United Makes Bold Environmental Commitment Unmatched by Any Airline; Pledges 100% Green by Reducing Greenhouse Gas Emissions 100% by 2050, https://hub.united.com/united-pledges-100-green-2050-2649438060.html [Last Accessed 25th February 2021]
