Eyes on the sky: eVTOL sector could take flight after pivotal American Airlines order

The eVTOL industry may have received the shot in the arm it needed with the first payment commitment from a major U.S. airline.

XH4D/E+ via Getty Images

Air taxi maker Vertical Aerospace (NYSE:EVTL) ended Friday with a 72% gain after American Airlines Group (AAL) agreed to make pre-delivery payments for 50 electric vertical takeoff and landing aircraft. The company also has a broader agreement with FLYINGGROUP that includes preorders of 1,400 aircraft at a total value of $5.6B.

Vertical's VA-X4 four-passenger aircraft can fly at speeds of more than 200 mph over a range of above 100 miles.

Last year, American Airlines had agreed to pre-order up to 250 of UK-based Vertical's eVTOL aircraft in a $1 billion deal, with an option to buy a 100 more.

"Our partnership with Vertical is a great example of progress in our commitment to reducing carbon emissions throughout our airline and the industry. We have made great strides in simplifying our fleet with newer and more fuel-efficient aircraft, and we are proud to take part in another step toward the development of advanced air mobility," stated AAL Chief Financial Officer Derek Kerr.

The deal is one of the most significant so for the eVTOL industry, which is based on the concept that there will be significant urban air mobility demand for next-gen aircraft with quiet-running electric motors.

Other players in the eVTOL industry include Archer Aviation (ACHR), Beta Technologies, Eve Holding (EVEX), Wisk, Jetson, Blade Air Mobility (BLDE), Joby Aviation (JOBY), Lilium N.V. (LILM), Vertical Aerospace (EVTL), Embraer (ERJ) and Volocopter. Of note, XPeng (XPEV) is partnering with urban air mobility company HT Aero with a concept closer to Jetsons-style flying cars.

Earlier this year, BMO Capital Markets noted forward progress for eVTOL players as the industry has managed to bring in a large amount of investment dollars despite market turmoil and seen orders come in for thousands of aircraft. Those factors are said to be helping public interest in the sector as it looks to bridge the gap from concept to commercial reality.

"We believe that eVTOLs could be used as replacements for the world’s aging fleet of helicopters. They are significantly less expensive to operate and generate about one percent of the noise of helicopters and have similar range," noted the firm.

Still, the market backdrop has been rough for eVTOL stocks in 2022 with investors shying away from growth stories.

Wall Street is still generally positive on the eVTOL sector due to the long-term potential even with higher interest rates and a risk-off sentiment in the market. Blade Air Mobility (BLDE) and Archer Aviation (ACHR) have the highest Seeking Alpha Quant Ratings of the group.

What to watch: The Farnborough Airshow could throw a spotlight on the eVTOL industry next week with new announcements. Read about what to expect with Boeing (BA) and the other major players in this week's Seeking Alpha Catalyst Watch.

Comments

[Nickfunds]

I like $joby $blde

[BTR2RSK]

"UK set to have world's biggest automated drone superhighway" (BBC)

www.bbc.com/...

"Joby Applies for U.K. Aircraft Certification :: Joby Aviation, Inc." (Joby news release) of yesterday.

ir.jobyaviation.com/...

[jason1544]

Not buying it. They don’t even have a flying prototype yet. An hour range isn’t enough anyways. Stupid.

[BTR2RSK]

@jason1544 "They don’t even have a flying prototype yet." Do you live under a rock, or are you purposely lying? Joby has production ready aircrafts, has 1000s of hours of flight time. The era of prototypes is long past.

[jmschristiansen]

@jason1544 it has to start somewhere. Looks like 1/2 hour range really- 100 miles at 200mph. I have had two electric motorcycles. There will be niche applications for these things- the rich guys who don't want to sit in traffic, and have a dedicated location at both ends of their commute to charge at. Short hop emergency transport? Again, if you can replace helicopters, there will be applications. My experience has been increased reliability and reduced maintenance, and helicopters have issues with both.

[sts66]

@BTR2RSK Does EVTL have a flying prototype? I know JOBY does - I highly doubt EVTL IPO's if they didn't have as many hours of flight time as JOBY did.

[Dalit]

I am very excited about the nascent evtol industry. Can't really predict confidently how it will play out, but the awesome versatility will appeal to the wealthy at the very least. I suspect it will expand beyond that, it is just a super tech.

Battery tech is obviously a limiting factor, but 1. Solid state batteries are (probably) coming, those will significantly boost the utility of these things and 2. These might be a good application for hydrogen + batteries. Hydrogen tanks aren't that large, and with a fuel cell or a turbine, you've got some on-board green fuel. I could be wrong but I have always viewed fuel cells as too clunky for cars, but a 19 or 100-seater evtol could easily accommodate it. Gotta guard against an e-Hindenburg though- to this day, not too many Zeppelins flying around.

I recently started a Roth IRA and have yet to allocate any of the funds. I think evtols will be my first strike- my horizon is up to 20 years, and this industry can potentially take over aviation altogether. Kind of a Cathy Woods move on my part, but I can endure the risk.

[JackCr]

It never ceases to amaze me how quick individuals are to comment who have absolutely no understanding of the potential for this industry........

[jeffallan1]

I am really trying to stay optimistic about this e-VTOL segment, but my struggle is to see any sound business case to support the growth of this new model of transportation. A couple of companies will survive and make these aircraft (my money will be on Airbus or Boeing or even Hyundai) to be used by a select few charter companies or high net worth individuals. The cost of the vehicles will be too high to democratize vertical lift, safety/reliability will become a concern, and likely infrastructure will not develop quick enough to support it. Does anyone remember the VLJ craze 20 years ago? You need to study history to realize the challenges that this segment is facing. It’s mostly hype and is much like crypto currencies… BUT, I believe we need this investment and research to help drive innovation. We probably won’t be Jetsons flying around in our cars, but the alternate engine technology that is being developed will drive improvements in the aviation industry. AAL is definitely using this for PR. If they saw an addressable market, they would already had a fleet of small Aircraft like Cirrus and Robinson helicopters flying around…they don’t because there is no margin in it, and they know the infrastructure, union costs and safety risk is too great to manage.

[Soressa]

A couple days ago I bought ACHR shares and so far I have made $37.50 on paper. Should I keep or sell then?

[657]

Odd, in that one of the bottlenecks talked of currently is the lack of pilots. Hauling 4-5 people around requires 1 pilot unless these are more like drones which I doubt. Seems like less than brilliant thinking on the part of AA

[User 56360468]

These aircraft carry 4 people and 1 pilot. There's no logical reason for American to buy a fleet of these, except to fly their own executives around or maybe fly a few high net worth people from an airport to wherever they're going like a charter helicopter service. They're too big for that to have a material benefit for revenues. Seems like a PR gimmick for the most part.

[richjoy403]

I'm 95% certain eVTOL's will dominate short haul commercial travel within a couple decades--assuming they are piloted by professionals, as the FAA has refused to approve 'flying cars' due to safety concerns.

Presently, there are too many players in this infant industry for me to attempt to pick a winner.

[User 56360468]

@richjoy403 Hard to do that flying 4-5 people at a time. To fly around a large number equivalent to a regional jet would require a major improvement in battery capability than anyone anywhere is even thinking about right now.

It's more eco-vaporware and hype from a lot of the same crowd that predicted oil would be mostly eliminated by 2022. Aircraft and ships will be the last things to be electrified. It's easy to electrify a car, since we've had golf carts for a long time and a lot of them are just glorified golf carts with a computer

[richjoy403]

@Found.Alpha -- In it's early years, I expect it would be a 'flying-taxi' for the wealthy (and its service to be far broader than airport-to-airport).

As to your attempt to compare small e-aircraft to golf carts powered by rechargeable lead-acid batteries invented by Frenchman Gaston Planté in 1860--I disagree with your premise.

[jeffallan1]

@richjoy403 if you weren’t so busy trying to impress us with your useless trivia on who invented the golf cart, you would have read that @Found.Alpha was comparing todays electric cars to golf carts, not “e-aircraft” to golf carts.

[jrnpanther]

Is there a clear path to profits with these companies without diluting the hell out of existing shareholders in the interim?

[Iflyvolaris]

@jrnpanther Not in the long run. Maybe you can profit as a quick trade banking on hype associated with one or two of the companies. The segment is much too crowded right now, but something will emerge.

[Sam Lanfranco]

As an economist I think that the best way to think of eVTOLs is as a replacement for today's helicopters and efforts at drone delivery. They have a future as feeder links to regional airlines, not so much as a personal flying device which for technical and cost reasons will remain a niche market.

[BTR2RSK]

@Sam Lanfranco some start-up are converting small regional turboprops to hybrid for regional airlines with thin margins, as maintenance and fuel are reduced considerably. Much food for thought on PBS documentary The Great electric airplane race.

[BTR2RSK]

Thanks for the article. I especially like the quote from BMO on how eVTOLs will replace helicopters.

[Iflyvolaris]

@BTR2RSK maybe in certain applications. I can't see eVTOLs doing much construction work in the near to mid future.

[energyguy921]

Bogus

These deals are put together where the buyer gets warrants that far exceed the value of the order

They also get bonus points for being “green”

Walmart just did a deal with Canoo, the warrants received far exceed the value of the initial order

Avoid this scam

[BTR2RSK]

@energyguy921 "this is a scam!" This is what you write on all eVTOL articles. Are you a bot or a parrot? Polly want a cracker?!

[Akutan]

@energyguy921 What are the warrants struck at? Yes I’m being lazy.

Your input here is appreciated as these deals are sucking in retail money when there is no clear path forward for many of these companies. I’ve been involved in aircraft certification and it is not an easy job.

This industry will work…..after 90% of these companies BK out.

[NowTheTime]

@BTR2RSK Looks like you tried to troll the wrong person. You just got schooled.