Global Trend

Eighteen months ago, when Trends last explored the world of flying taxis and personal aviation vehicles, the climate for business in general and transportation, in particular, was very different.

At that time two industry visionaries seemed to be leading the way: Uber Elevate and Lilium. And to the Trends Editors, the strategic realities of this emerging industry were beginning to resemble the early world of personal computers where new technology and an innovative business model was about to create an explosive market opportunity. In that context, Uber Elevate is role reminded us of Microsoft’s role in creating the open DOS/Windows model by pulling together a broad coalition of partners to create hardware, infrastructure, and a standards framework. Meanwhile, Lilium seemed to be pursuing a closed model resembling that of the Macintosh, taking upon itself the design of aircraft, addressing regulatory challenges, and creating a network of vertiports.

As late as January of 2020, people were busily commuting to work in congested urban hubs. Highways in centers like New York, Dallas, and Los Angeles were bumper-to-bumper. And airlines, hotels, ridesharing services, and car rental companies were all generating record revenues. Then suddenly, more people started working from home, the exodus from traditional urban centers accelerated, and travel for business and pleasure nearly ground to a halt.

Rather than thinking about ways to commute faster, the focus turned to have a better and safer personal experience at home. As a result, the business case for aerial ridesharing seems far less clear than it did in mid-2019.

Consequently, the dynamics of the emerging industry are rapidly changing, and the changes are reflected in the changing role Uber is playing.

From 2016 through the opening days of 2020, Uber and its subsidiary Uber Elevate served as the principal cheerleaders for the emergence of Electric Vertical Take-Off & Landing (or eVTOL) vehicles as airborne taxis. By late 2019 it had selected eight eVTOL aircraft designs as candidates for participation in creating an airborne analog to its automobile-based ride-sharing service.

Uber began experimenting with flying taxis in 2016, and Uber Elevate had promised to launch services in Los Angeles, Dallas, and Melbourne in 2023. In the process, Uber worked with its commercial partners as well as the FAA and the European Union Aviation Safety Agency to come up with pilot certification standards, airframe standards, and airspace regulations.

But, as with so many other businesses, the COVID19 shock changed everything. With fewer people going fewer places, Uber has been forced to refocus on its core business and has promised investors it would turn profitable on the basis of adjusted earnings before interest, taxes, depreciation, and amortization (or Ebitda) by the end of 2021.

To do so, Uber sold its self-driving car division to Aurora and Uber Elevate to one of its aircraft-development partners, Joby Aviation. Joby is developing the S4, an eVTOL that can fly a pilot and four passengers as far as 150 miles, as fast as 200 mph. Joby expects the S4 to be certified by 2022 and to enter service in 2023. Back in 2019, Joby announced that it was looking to fill 1,600 jobs for the S4 project.

Prior to the merger with Uber Elevate, Joby had already raised about $700 million from firms such as Toyota, Intel, and JetBlue.Uber’s latest investment brings the total Joby has raised to $820 million, of which $125 million came from Uber.

Unlike a typical market innovator, Uber Elevate was designed to serve as a catalyst for an entire eco-system and to act as a bridge between Uber’s existing ride-sharing business and a similar airborne business model. Its role was to interface with customers and regulators while providing plug-and-play eco-system support for aircraft makers & operators, vertiport owners & operators, and regulatory institutions. This model meant that Uber provided the essential software and service infrastructure to drive revenues and ensure compatibility; this would potentially enable it to earn an extremely high ROI, once the venture was launched. However, Uber Elevate was also faced with the costs of building this industry-supporting system and getting it to the point where revenues began to flow.

The sale of Uber Elevate to Joby now means that it’s no longer clear that anyone is still driving toward an open solution to the aerial commuter challenge.

Meanwhile, Germany’s premier flying taxi startup, Lilium, has not been deterred by the COVID19 disruption. In fact, it just gained a foothold in the U.S.

The five-year-old venture-backed startup from Munich announced that it will build a 56,000 square-foot transportation hub for its aerial taxi service in Orlando, Florida. And the company aims to have passengers taking regional trips in its electric five-seater aircraft starting in 2025.

Lilium says it will construct a $25 million “vertiport” in Lake Nona, a planned community of about 65,000 people within the Orlando city limits. It will work with the primary real estate developer in the area, Bahamas-based Tavistock Development Company, on the development and construction of the vertiport.

Lilium’s project will be privately financed, though the Orlando city council is considering awarding the company an $800,000 tax break over nine years, according to the Orlando Business Journal. Lilium says it will create more than 100 jobs in Orlando, and the city estimates the transportation hub will generate $1.7 million in economic activity in a 10-year period.

Lilium is the latest electric vertical takeoff and landing startup to take an incremental step toward launching a full-scale regional transportation service.

The business case in Orlando is clear. With Lilium, people will be able to commute to Tampa in 30 minutes, which is a notorious one-and-a-half to two-hour drive. Today, there’s no other alternative to get there. But you aren’t limited to an Orlando-to-Tampa route, stay on board for two extra minutes and you’re in St. Petersburg.

Lilium burst onto the scene in 2017 when it announced the first test flight of its two-seater prototype. Then, two years later, the company started testing its five-seater prototype, called the Lilium Jet.

The Lilium Jet is not your typical aircraft: there is no tail, rudder, propellers, or gearbox. It has an egg-shaped cabin perched on landing gear with a pair of parallel tilt-rotor wings. The wings are fitted with a total of 36 electric jet engines that tilt up for vertical takeoff and then shift forward for horizontal flight. In that configuration, the Lilium Jet has a range of 186 miles and a top speed of 186 mph.

That’s much farther than many of its competitors are predicting for their electric aircraft and about the same as Joby’s S4. Lilium’s performance is enhanced by the Jet’s fixed-wing design, which requires less than 10 percent of its maximum 2,000 horsepower during cruise flight.

Just this past year alone, the company raised $275 million from investors, including Baillie Gifford, the 112-year-old Scottish asset management firm that is the second-biggest shareholder in Tesla after Elon Musk.

Notably, Joby Aviation and Lilium aren’t the only companies with designs for flying taxis. In fact, there are more than 100 different electric aircraft programs in development worldwide, including startups like Volocopter, Ehang, and Wisk Aero, as well as offerings from industrial giants like Hyundai, Toyota, Airbus, Boeing, and Bell.

And Lilium isn’t the only non-US eVTOL company that wants to serve the American market. Earlier this year, Chinese drone maker Ehang demonstrated its autonomous air taxi in the U.S. for the first time, with its all-electric two-seater flying above a test track south of Raleigh, North Carolina, for about five minutes.

Another German startup, Volocopter, unveiled its latest model at the Consumer Electronics Show in 2018. And it built a pop-up vertiport in Singapore for a tech conference in late 2019. The company recently started accepting reservations for flights on its 18-rotor electric aircraft — though it won’t be in service until 2023 at the earliest.

Of course, Lilium and all of its competitors will need to overcome several serious technical, financial, and regulatory hurdles before any of their small, battery-powered aircraft are cleared for takeoff. Lilium has yet to publicly demonstrate that the Lilium Jet is safe for human passengers, nor has its battery range been independently verified.

The power-to-weight ratio is a huge challenge for electric flight. Energy density — the amount of energy stored in a given system — is the key metric, and today’s batteries don’t contain enough energy to get most planes off the ground. To put this in perspective: jet fuel gives us about 43 times more energy than a Lithium-Ion battery that’s just as heavy.

These barriers aren't trivial. There have been numerous demonstrations of battery-powered flight, but there are still no electric aircraft in commercial operation anywhere in the world. Any flying taxi service will have to be certified by the U.S. Federal Aviation Administration and numerous other aviation regulators across the globe. And Lilium, Joby, Ehang, and Volocoptor all still need to prove that they can produce their vehicles at a mass scale.

At this point, the foundation for industry growth has been largely laid, but it remains unclear when flying taxis will become an everyday reality.

Given this trend, we offer the following forecasts for your consideration.

First, the Urban Air Mobility industry of 2030 will be dominated by a small set of vertically integrated competitors.

Uber’s abandonment of the “open industry architecture” model indicates that the kind of end-to-end solution pioneered by Lilium and being embraced by Joby and Volocoptor may be the only way to create a UAM industry that can be profitable in the real world that lies ahead.

Second, those industry pioneers that survive will share in an enormous business opportunity.

Morgan Stanley predicts that UAM could eventually become a $1.5 trillion a year global market opportunity. But creating that opportunity will not be easy; some experts estimate that successful competitors may have to invest $4 billion or more to fully develop a vertically integrated business in the UAM space. Today, the unknowns include consumer price elasticity, regulatory approvals, aircraft safety, aircraft utilization rates, and labor costs. Once pilot-programs in key test markets reduce this uncertainty, attracting both debt and equity financing will become much easier. And,

Third, battery-based eVTOL technology will be supplanted by hybrid-electric and fuel cell solutions.

Batteries are ill-suited to aircraft because of limitations related to range, recharging infrastructure, and long-term reliability. Furthermore, large-scale production of fuel cells and hybrid powertrains coupled with super-capacitors is likely to reduce the lifecycle capital costs of the aircraft. Industry technologists are already addressing this opportunity. For instance, a company called Verdego is developing cost-effective hybrid-electric powertrains for eVTOL aircraft, while Honeywell recently acquired fuel-cell-maker Ballard Systems with the primary objective of applying this technology to eVTOL opportunities.