BEYOND THE MYTH, WHAT USE CASES FOR FLYING TAXIS?
“Mark my word: a combination of aeroplane and motor car is coming. You may smile, but it will come” Henry Ford said in 1940. Indeed, flying cars have always been a human fantasy and are part of every good science fiction movie. This fantasy has increasingly materialized over the past 5 years with a swell of popular interest in on-demand urban air transportation.
Following this trend, a new category of aircraft has emerged: eVTOLs (electrical vertical take-off and landing aircrafts) with a strongly differentiating offer and answering a growing demand for new mobility solutions due to increasing urbanization. Many players have entered this nascent market, raised funding and secured pre-orders (already 7k+ pre-orders) to be fulfilled in 2025 and beyond.
Since mid of last decade and the first announcements, numerous progresses have been made on this new transportation mode, both in terms of technology and regulation. Some may wonder what is left of the initial promise and what it takes to operate an eVTOL in a near future.
Flying “cars” is moving further to become a reality, yet with only limited use cases
Five years back, there was a wide variety of plausible 2030 scenarios for eVTOLs as these aircrafts answered a market appetite for cleaner means of transport with strong differentiating criteria like faster transportation, increased predictability, noise reduction, safety:
A. “The Jetsons” scenario where eVTOLs would supplement private cars, for door-to-door travel used by all – The Jetsons is an American animated sitcom displaying a family living in the future
B.?The “Mass transit service” scenario where eVTOLs would substitute for commuter rails and similar
C. The “AirBlack” scenario where eVTOLs would work instead of black cars on selected routes
D. The “toys of the rich” scenario where eVTOLs would replace helicopter trips and expand this market
Since then, decarbonized air transport with vertical take-off has made significant progress for their development and 3 step changes have shaped what will be the future of the eVTOL market.
Moreover, some players succeeded in developing a viable technology to secure vertical to horizontal flight modes, despite high uncertainties due to the risky transition phase – e.g., first flying test for Lilium in 2019, with a speed of 100km/h and take-off vertically at rates of 152m/min. Yet strong power need during vertical phases restricts battery use to less than 60% for cruise and limits eVTOL distance range to 250km max.
2. A great technology is not sufficient to view flying taxis above our heads tomorrow. Aerospace regulation authorities (EASA, FAA etc.) have also shown a strong capacity for adaptation and agility to produce new frameworks in ~2 years while it used to take more than 5 years in the traditional aerospace industry. As an example, the EASA (European Union Aviation Safety Agency) published a Complete set of dedicated technical specifications in a Special Condition for VTOL aircraft in 2019 only two years after first eVTOL announcements. This agency specified that in the next 10 years, eVTOLs operations would probably be restricted to a set of predefined routes with very limited opportunities to fly over cities (only above the ones authorizing helicopters today, e.g., Sao Paulo). It also stated that an eVTOL seats between 2 and 9 people, with a maximum take-off weight of 3.175kg, thus excluding PAV (Personal Air vehicle) from the eVTOL definition.
3. Finally, as Adrian Zanelli, Chief Financial Officer of Urban-AirPort, said “Cars need roads, trains need rails, and eVTOLs need vertiports,”. On that point, the FAA (Federal Aviation Administration) recently released new design guidelines to ensure the standardization of these new infrastructures, able to operate with all types of certified eVTOL aircrafts. The agency specified that the landing zone should be a square, with a funnel-shaped area above the vertiport, designated as an "obstacle-free volume". Indeed, infrastructure needs have been clarified in accordance with eVTOL designs and technology and require fast and high-voltage chargers of 150-350kW, passenger terminal and large landing pads. Hence, these vertiports and heavy infrastructures prevent the flexible point-to-point transportation use case, as a simple landing pad in the backyard is still a pipedream for now.
This framework now brings more clarity on eVTOL service opportunity and use cases in a near future. Flexible inner-city connections and ‘Jetsons-like’ special point to point transport replacing private cars are a utopia for the time being, as well as long-distance transportation. Conversely, only use cases with hub to hub on key routes are potential areas for development and targeted by future eVTOL operators. From the 4 initial scenarios that are described above, the “Jetsons” and the “Mass transit service” ones will not be a reality in the next 20 years. The former would mean very light infrastructures and tricky traffic regulation, while the latter would implicate big eVTOL aircrafts able to seat more than 20 people which won’t exist in the next decade.
Thus, only two remaining scenarios seem feasible. The “toys of the rich” one is the most likely in the short term, with eVTOLs gradually replacing a portion of the helicopter market for short to medium distance (less than 250km), with a limited payload of max. 9 people, on predefined routes. In the long term, the ”AirBlack” scenario is targeted by operators, offering affordable trips but excluding special point to point transportation to one’s secluded home available today with a taxi.
These routes are mainly city to airport and inter-city transport. For example, for the 2024 Olympic Games in Paris, a project is already well underway to develop air taxi services from Roissy airport to Olympic sites. This project is led by Volocopter (one of the main eVTOL OEMs with a multicopter architecture), ADP (Roissy airport operator) and RATP (Paris public transport operator). Volocopter also conducted flying tests with Rome airport operator, in cooperation with UrbanV a new company designing and managing vertiports.
On these specific use cases, eVTOLs show a clear competitive advantage in comparison with other means of transport. For short and medium trips, flying taxis have much shorter trip duration than cars (downtown San Jose to downtown San Francisco in 27 min vs. 1-2.5h for Uber – see exhibit #1). In the air, they require cheaper operating costs for a quieter trip than helicopters ($150-300/hour vs. $400-800/hour and 65 dB vs. 90 dB for helicopters). However, for very short trips of less than 10km, vertiport access and processing effort hampers the use of eVTOLs as more than 8 minutes of handling/processing will need to be compensated during flight.
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As the framework of this market is increasingly clearer and eVTOLs display true competitive advantages, the business model of future eVTOL players shows a strong economic interest.
Operating flying taxis present attractive business model in the next years
Business models greatly vary among the types of eVTOLs with different technologies, ranges, seating capacities and speeds but demonstrate a strong economic interest overall. Indeed, three main vehicle architectures have been identified:
Hence, because of this this large technologic array, one vehicle could have a payback period of 1 to 4 years and a contributive margin from 30% to 60%, depending on its architecture, use cases and average utilization. For example, Joby claims that its tilt-architecture aircraft will have a 1.3-year payback period.
Revenue. eVTOL operators have a revenue model directly correlated with price and seat utilization (see exhibit#2) for which we see room for improvement over the years. Although today’s consensus forecasts a price of ~3$/mile, future consumer should accept for a higher price to beneficiate from eVTOLs competitive advantages versus the other transportation modes. Indeed, EASA report ranked price only #8 among concerns about Advanced Air Mobility and market research shows that with a time reduction of 50% and an improved duration predictability, prices double those of taxis in the USA and in Europe would be accepted by consumers.
Costs. As for costs, battery & energy, pilot salary, vehicle cost and landing fees are the biggest drivers. Due to a structure where ~80% of costs are related to vehicles, costs will not rapidly decline simply through scale but rather depend on technological change like autonomous flight and improved batteries. Indeed, even though regulation is not mature enough for unmanned aircrafts, some players already announced that they are developing uncrewed eVTOL aircraft like Boeing-backed company Wisk. In parallel, decreasing power consumption from 500kW to 150kW would increase the margin by ~10%. Although players are mainly developing electric batteries, some players are trying to develop hydrogen fuel cell technology like Hypoint to increase battery capabilities.
Combined with a profitable operating model, the target addressable market turns out to be very attractive as well. As explained before, it could be seen as the combination of the VTOL replaceable market for short-to-medium range (<250km) with limited payload (<9 people) and new opportunities due to highly competitive advantages (e.g., speed, cost). With a conservative approach and by using this methodology, US market alone could have a Target Addressable Market between $5B to $6B per year, at maturity.
5 bold predictions for the future of eVTOLs
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Advanced Air Mobility has gone from a futuristic vision of flying cars from Blade Runner to a potential mobility revolution. Hence, scenarios in the future are limited to specific use cases, i.e., city to city and city to airport transportation. In parallel, operator business model is precising, revealing a strong economic interest for this market for eVTOL players with high margins and large addressable markets. However, while initial forecast projected first eVTOL to be operated in 2022, this date has been pushed year after year. An increasing number of eVTOL OEMs are communicating on delays on their entry into services like Joby which pushed back commercialization from 2024 to 2025 earlier in November, while some have even ceased their activities such as KittyHawk over the past month. In parallel, access to equity market is becoming increasingly difficult and questions the ability of players to survive until their entry into service.
In our next article, we will analyze who are the players who want to capture a share of the prize and what is the road ahead for first entry into service.
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