Moving Advanced Aerial Mobility Forward
How will capital underwrite the innovation in aerial mobility?
I use the term Advanced Aerial Mobility (AAM) to represent how electric propulsion and automation enable new forms of flight. Advanced aerial mobility is about accessing vertical space in a way that we could not do before and ultimately, it’s about vastly increasing the occasions and use cases across the economy upon which we employ flight to move more efficiently and drive productivity. My article, Technology is Redefining Flight, explains these fundamentals in more detail.
Anyone familiar with aerospace knows the steep capital requirements to develop and commercialize new aviation technology. As technology demonstrators and prototypes take flight, over $1 billion was invested in 2018, and likely more this year. Yet, this is tiny compared to the capital required to ship production aircraft and field mobility services. The questions remain as to how we fund this future.
However, the question is not “Where does the capital come from?” but rather, “What can advanced aerial mobility do to position itself to attract more capital?”
I think the answer is “quite a lot”. We have it within our control to catalyze a market for investment in advanced aerial mobility. Given its fundamentals, AAM can drive a broad wave of innovation fueled by rational, profit-seeking investors. However, to satisfy this capital we must identify and plan around the lowest-risk paths to commercialize the technology, on our way to realizing a grander future vision. To try to do it all at once is unrealistic, but moreover unnecessary.
Advanced aerial mobility encompasses a range of new flight capabilities and a spectrum of use cases, many of which we, quite frankly, haven’t uncovered yet. Within this sit concepts such as urban air mobility, sustainable aviation, drone delivery, eVTOL, etc. Some are core technologies, others are applications. Some are relatively simple, others are feats at the very leading edge of engineering. Some will work within today’s national airspace system, others will require extensive changes to operating rules, airspace design, communications, ground infrastructure and more.
Within this collection of opportunities sits Urban Air Mobility (UAM), essentially the idea of using new flight as air taxis to move rapidly across a metropolitan region point-to-point and on short notice. Perhaps it is out of pop culture (cue Jetsons, Blade Runner, Star Wars, etc.), perhaps it is from our taste of it with helicopters in this role decades ago, or perhaps it is the acute daily pain cities the world over struggle with as road-based transportation systems buckle under megacity scale (our high urban real estate prices ultimately represent a failure of transportation). For whatever mix of these reasons, we want urban air mobility badly and we have put a bright spotlight on it.
Maybe UAM serves as our “North Star”. Extensive analysis, from Uber’s whitepaper to the work behind NASA’s UAM Grand Challenge and studies from both industry and academia drive a consensus that UAM is a compelling application and that the future market is huge, provided that we can overcome the technical, regulatory, and societal hurdles to reach high scale.
Summed up, Urban Air Mobility is fantastic.
But should it be our first profit-generating milestone? Will it attract capital?
Let’s look at that question from a few angles and in the process revisit my earlier assertion that going straight for the grand vision is unrealistic but moreover, unnecessary.
UAM is one of the most demanding and complex applications. Due to lack of experience with the model, many unknowns about its optimal form persist. Carrying passengers over urban areas, operating at high tempo and in dense airspace requires a complex choreography of systems and people to execute flawlessly as well as automated and quiet vehicles to fly at low maintenance and operating costs. This may sound like a negative statement — it is not. I have seen enough already to have no doubt this can be done, with time.
From a manufacturing perspective, what is the most prudent way to introduce and scale up AAM vehicle production? Are the needs of the UAM business model compatible with the early vehicles, and can we expect vehicle production to keep pace with demand?
As transportation for the general public, the air taxi model holds itself to a standard of offering high-speed transportation at a reliability level that provides a positive experience for the traveler (i.e. an overall low-friction trip and a seat available when requested). Delivering this requires scale and thus a price point low enough to appeal to a significant segment of the population, supported by high utilization of vehicles and effective amortization of vehicle costs.
In the early days, UAM services can start with a limited number of fixed routes running regularly scheduled service, for example to/from the airport. With fixed routes, utilization can be high, even at service introduction. In fact, we are already seeing UAM service providers pursue this strategy.
To win, the UAM business model depends on rapidly driving down pricing while growing the market and capturing network effects. Expect companies to aggressively launch in new cities to protect their flank from competitors who would aim to take root there.
The jump from low-scale rigid networks to high-scale flexible ones coincident with the expansion of footprint demands rapid increases in fleet size, while driving down vehicle costs. This requires achieving rates of production well beyond recent experience in aerospace. The adjustments to manufacturing will include technology integration in the manufacturing process, restructuring of the supply chain, and greater capacity investment. Manufacturing considerations also reach back to the design and certification stages, requiring increased investment there as well. All of these factors increase risk — particularly for designs still being refined. The larger and more complex the vehicle, the more costly this process will be.
This will create tension between service providers and vehicle manufacturers. Who will take the risk and who will absorb the costs? The UAM model is possibly unsustainable unless it can scale up. Vehicle companies are likewise dependent on UAM to the extent that they design products tightly purposed to the UAM use case.
Can we lower the risk if we open the aperture to start with more multipurpose and smaller vehicles where initial volume costs can be more easily absorbed? Offered as either a service or direct ownership, this could provide a learning experience to prepare for the demands of high-scale UAM. Finding a profit-generating path with early customers here can make a big difference.
From a regulatory standpoint, certain applications of AAM require more regulatory accommodation or changes to rules than others. Some uses of AAM simply require an eVTOL (or other type) to be certified as airworthy. As far as the national airspace system is concerned, they fly and behave like any other aircraft. The FAA is well-equipped to certify new vehicles in terms of their organization, regulatory tools and subject matter talent-base.
Other applications depending on autonomy and high-density operations require much deeper changes to our airspace system as well as ground infrastructure. Changes that we have already seen, in the case of drones, to require research, data gathering, and consensus-building across a range of stakeholders.
AAM applications that require only certification of new aircraft could be interim victories that produce profits and attract the capital to let the industry progress. The answer lies in how distributed electric propulsion and modern fly-by-wire controls create capability to drive new markets.
More generally, with such a broadly transformative capability as advanced aerial mobility, it seems strange that we would assume to tell our customers in such a tightly prescriptive way how they are going to access and use the technology. Perhaps a wiser approach might be to put the technology in their hands and learn from them as they adapt it and put the capability to use. We may discover compelling applications that we are not currently considering.
Years from now, we might look back and talk about an iconic product that defined the movement. Perhaps it will be a versatile, reliable, diminutive vehicle that found its way into many unanticipated uses — aerial mobility’s Piper Cub or Model T.
As a business building this new technology, there is tremendous value in actually shipping product. Whether aiming for a specific application or bringing a multi-use product to market, identifying a shorter, less complex path to scaling revenues delivers strategic value by giving the company more control over its destiny. By shipping even a few hundred vehicles a year, the company gains experience designing, manufacturing and supporting its product. It consolidates a deep core of talent around a developed and embedded corporate culture. With this, it gains access to capital and uses the insights it learns from its customers to stand out from its peers and put itself in a position of strength for its next chapter of growth.
The impact of new technology on aviation is vastly broadening the applications across the economy where flight will be employed to drive productivity, efficiency, and solve business problems. It will become a crucial part of future transportation fabric, both for goods as well as people.
There is an inevitability to this that we can agree on, but there remain many unanswered questions with respect to the form and timing of any single application. Early applications of AAM will succeed working within today’s national airspace system. On our way to realizing the grand vision of high-density automated air mobility, we should break the challenge into smaller victories we can claim and profit from. We will gain tremendously valuable insights from our customers if we empower them with the right products. This will de-risk our efforts, more easily attract capital to our mission, and likely increase the speed and certainty of achieving our ultimate goals.
