TNMT Newsletter #165: Leading innovators

Hi there,

We’re still riding the high from our 10-year LIH anniversary celebration in Berlin last week, an event that quite a few of you attended.?

It was fantastic to reconnect with so many familiar faces who've,?quite literally, traveled with us through a decade of innovation in Travel and Mobility Tech.

In many conversations, we reflected on the past decade.

Reflecting on those chats, two major trends clearly stood out as having most shaped industry dynamics over the past ten years:

1. The Rise and Fall of Venture Capital

Prior to 2020, the Venture Capital market, particularly within Travel and Mobility Tech, experienced rapid expansion.

This period was marked by the winner-takes-all playbook of asset-light tech startups in segments such as ride-hailing, shared accommodations, and electric scooters and bikes.

Since the pandemic, however, there has been a significant shift.

The once-celebrated model of (unprofitable) VC-backed hypergrowth has been scrutinized, shifting perceptions about what constitutes a disruptive and sustainable startup.

2. The Evolution of Corporate Innovation Vehicles

When the Lufthansa Innovation Hub was established in 2014, there were only a handful of dedicated innovation units within the corporate Travel and Mobility Tech ecosystem.

Kudos to our founders for leading the charge!

Over the years, this number has grown steadily, with nearly 100 standalone entities now operating in aviation alone.

What has changed over the years is the type of innovation vehicle that corporations prefer, influenced by shifts in the economic environment?and the growing need for more measurable innovation impact.

• Initially, innovation units often experimented without clear direction, simply "doing something with startups."?
• Over time, Venture Building, like what we've done at LIH, and Corporate Venture Capital units gained popularity, especially during the late years of "cheap capital"?between 2019 and 2021.
• More recently, we've seen a shift towards Venture Clienting. This model is often favored because it offers more direct control over innovation projects and aligns closely with strategic corporate goals, making it particularly appealing in times of financial scrutiny.

What remains constant, however, is the essential necessity?of innovation itself, especially in Europe, where economic growth engines are limited.

Every company needs innovation more than ever!

So, the focus is not on whether to innovate but rather on how to innovate and with which tools.

With all this being said, we are currently preparing an in-depth piece that delves into these changing innovation dynamics in Travel and Mobility Tech and our specific LIH learnings.

Stay tuned for that.

Until then, it’s time to turn our attention to an emerging sector that has been in development for nearly a decade as well, yet still awaits its breakthrough moment—Advanced Air Mobility.

Today’s research focus will explore just that.

Enjoy.

Your Lufthansa Innovation Hub Team

Research?

(5/8) Continuing Our Deep Dive into AAM's 2024 Landscape

While reflecting on a decade of innovation at LIH has kept us busy these last two weeks, another significant research focus has been our ongoing analysis of the Advanced Air Mobility Sector (AAM).

As you might recall, we committed to a year-long research series earlier this year to decode the eight major components shaping this emerging sector, assessing the commercial viability of future air taxis in forms like eVTOL, eSTOL, and eCTOL.

Thus far, we’ve examined four out of eight industry factors:

• Technological Progress: We've observed slow but steady advancements, especially in patent filings related to innovative propulsion and energy systems—essential for developing electric propulsion that’s efficient, quiet, and most importantly, capable of meaningful range.
• Regulatory Status Quo: We've noted that regulatory bodies are actively refining their frameworks, with several AAM contenders like Ehang, AutoFlight, Volocopter, and Joby Aviation moving closer to Type Certification, which is quite promising (despite the absence of real test flights).
• Scalability of Vehicle Production: The pace here is concerning. Our last update revealed overly optimistic production forecasts by most AAM firms. Why are we concerned? Manufacturing complex aeronautical structures and cutting-edge propulsion systems presents significant challenges, making current ramp-up plans seem unrealistic compared to historical trends in aerospace manufacturing.
• Funding Landscape: This is perhaps the most alarming aspect so far. Many AAM companies are nearing the end of their financial runway, struggling to secure necessary funding in a quite challenging macroeconomic environment and a cooled-down VC market.

So overall, the picture is mixed (but mostly advancing) when assessing AAM’s readiness for commercial viability compared to previous years.

With this in mind, we now turn our attention to the remaining elements of our assessment.

As a short teaser upfront, the upcoming insights might paint a much more pessimistic picture.

In fact, it’s time to challenge many of the previous assumptions about AAM that were actively pushed by various stakeholders in recent years.

But let's proceed step by step. Today, we delve into the fifth critical industry factor: the AAM ecosystem.

The Ecosystem Imperative for AAM

As highlighted in our scalability analysis, Advanced Air Mobility can only transition into commercial viability with a robust and integrated ecosystem.

So, how advanced is the current AAM stakeholder ecosystem?

To fully understand the scope and complexity required to realize AAM, we have sketched a basic framework that provides an overview of the needed AAM ecosystem of the future, detailing the various segments and key players involved.

What does this overview tell us?

• The AAM industry is far more complex than merely developing and manufacturing aircraft.?
• The ecosystem encompasses a wide range of interconnected components, such as landing infrastructure, airspace management, digital infrastructure, and customer integration into existing transportation systems.?
• Success in AAM requires a coordinated effort across multiple sectors, underscoring the need for extensive collaboration and integration.?
• For instance, the infrastructure alone is a complex domain, involving vertiports, zoning and permitting processes, and airspace management, among others.

Achieving success in AAM depends on simultaneous progress across all six buckets.

A delay or failure in one area could significantly hinder the growth of the entire ecosystem.

For example, even if aircraft production scales as planned, a lack of sufficient landing infrastructure or digital airspace management could render the entire operation ineffective.

Assessing the Maturity of All Building Blocks

Given the multifaceted nature of the future AAM industry, it is essential to determine which of the six building blocks are more advanced than others and which currently present hurdles for the industry's path to market readiness.

We evaluated the maturity of each ecosystem component by analyzing media mentions for each building block.

Our findings are visualized in the chart below.

The main finding: The AAM industry is predominantly focused on developing flying vehicles, while other essential building blocks remain in their extremely nascent stages.

This disparity in focus is further reflected in the distribution of VC investments across the different sub-segments of the AAM ecosystem.

• Over the past decade, the majority of investments have been directed toward the Flying Vehicle segment.?

• Air Mobility Services, Digital, and Physical Infrastructure have received only a fraction of this sum, even though they have been slightly growing in recent years.

This insight underscores a crucial challenge for the AAM industry: while significant progress has been made in developing the vehicles themselves—despite none being market-ready yet—other critical components of the ecosystem, such as infrastructure and services, have not received the same level of attention or investment.

Addressing these gaps will be essential for achieving a fully operational and scalable AAM ecosystem.

Promising Ecosystem Progress

Despite these challenges, there are also positive signals indicating a gradual shift towards addressing the underdeveloped ecosystem components.

The following industry activities provide reasons for cautious optimism. For example:

• Lilium ’s launch of the PowerON MRO program is a critical step toward establishing the necessary maintenance infrastructure for AAM aircraft, ensuring operational reliability and safety.
• Archer ’s collaboration with Falcon Aviation to design and build a vertiport network in Dubai, Abu Dhabi, and the United States signals progress in creating the physical infrastructure needed to support AAM operations.
• 法航 / KLM Royal Dutch Airlines E&M has collaborated with multiple AAM OEMs like Ascendance Flight Technologies and Ampaire to establish aftermarket services, which underscores the importance of developing a robust support infrastructure.
• Robotic Skies ’ creation of a global network of over 250 Part 145 repair stations across 50 countries for AAM aircraft is a significant advancement in ensuring the availability of maintenance services worldwide.
• The partnership between Eve Air Mobility and DHL focuses on studying supply chain needs, including spare parts distribution and battery management, which are essential for the sustainable operation of eVTOLs.
• Skyports Infrastructure ' successful raising of an additional $110 million to expand its air taxi infrastructure is another positive indicator of growing investment in the necessary physical infrastructure.
• Last but not least, Hyundai and Kia's partnership highlights the potential for AAM technology to integrate with existing transportation solutions, showing progress in public acceptance and operational planning.

In light of all these observations, we slightly adjusted our AAM ecosystem score from 2 in 2023 to 2.5 in 2024.

For more details behind our thinking, check out our full assessment.

Read Article

Press Picks?

Our Recommended Must Reads?

GOOGLE & TRAVEL?– Google unveiled a suite of new AI tools designed to enhance vacation experiences for travelers. These tools, which range from immersive route previews to advanced photo editing capabilities, aim to address common challenges faced by tourists and provide innovative solutions for trip planning and documentation.

Watch more by?PPC

SOCIAL MEDIA & TRAVEL?– Tours & Activities platform Klook is integrating booking capabilities with TikTok as part of its Kreator program for influencers. The partnership enables users across seven markets in Southeast Asia and Japan to find and book activities within the TikTok app. The move is part of the Asia-based company's drive to attract Gen-Z and millennial travelers.

Read more by?PhocusWire

ALASKA & EXPEDIA – Alaska Airlines is launching a new accommodations-focused platform powered by Expedia Group. The pairing marks the latest in a string of companies looking to become more full-service travel providers. The tool allows travelers to explore deals on more than 900,000 hotel and vacation rental properties, and earn & redeem miles via Alaska’s loyalty program.

Read more by?PhocusWire

NEW TRAVEL STARTUPS –?This year’s FutureTravel Summit has announced the contenders for its pitch competition featuring 10 of the most promising early-stage travel startups globally, as they compete for a prize package valued at €330K.

Read more by?Future Travel

AIRLINE INNOVATIONS?– In its August Airline-Tech Radar, OAG has named the three most exciting innovations that are enhancing operational efficiencies and enriching the passenger experience across the airline industry, this time with a focus on innovative ancillary services.

Read more by?OAG

ELECTRIC FLYING?– NASA and MagniX unveiled the de Havilland Canada (DHC) Dash 7 aircraft that they’re preparing to retrofit with a hybrid-electric propulsion system as part of the agency’s Electrified Powertrain Flight Demonstration (EPFD) program.

Read more by?AIN

Deal Tracker?

Most Recent Investment Deals

– VC –

SkyDrive - The Japan-based eVTOL manufacturer raised $95.03 million in Series C funding from Pegasus Tech Ventures, SCSK, and Kansai Electric Power, along with other investors. The funds will be used to improve testing facilities and organize operations to speed up development and certification. It will also strengthen its quality assurance along with other key departments to help start mass production and make sure the aircraft are reliable and high-quality.

resal - the Saudi Arabia-based e-gifting platform specializing in digital cards, rewards solutions, and loyalty programs, including partnerships with travel and hospitality platforms, raised $9 million in later-stage funding led by Derayah Ventures with participation from five other investors.?The funds will be used to accelerate business growth within Saudi Arabia.

Otto - the US-based AI platform for planning and booking business trips raised $6 million in seed funding led by Madrona Venture Labs , with participation from Direct Travel . The funds will be used to enhance its platform.

Signol - the London-based platform that enables companies to reduce emissions and achieve fuel and carbon savings, raised $3.62 million in an early-stage funding round led by TMV with participation from shipping industry stakeholders Ultranav and MOL PLUS. The funds will be used to support a proof-of-concept (POC) in the corporate travel sector, utilizing behavior change strategies to reduce avoidable emissions from business travel.

Besty AI - the US-based AI guest messaging service for vacation rentals and hotels platform, raised $1.5 million in seed funding led by Bungalow Capital and Ridge Ventures. The funds will be used to enhance its platform and double the team size.

– M&A –

Book4Time Spa and Ancillary Revenue Software - the Canadian developer of cloud-based business management software intended for hotels and resorts, was acquired by Agilysys, the US-based hospitality SaaS on-premise solutions for hotel providers, for $150 million.

Lianyungang Jiaao Enproenergy - a 15% stake of the Chinese sustainable jet fuel company, was acquired by BP, the UK-based oil and gas company that explores, produces, and refines oil around the world for $49.26 million.

Globe All India Services Ltd - ?the India-based corporate travel service provider?was acquired by Yatra, the India-based online travel platform, for $15.25 million.

Selina - after facing insolvency in late July, the UK-based hospitality company was acquired by Collective Hospitality, owned by Destination Group, the Bangkok-based operator of real estate investment and leisure resorts, for an undisclosed amount.

Hungry Robots - a US-based data provider platform specializing in vacation rental data points, was acquired by Revnest, the US-based operator of a real estate marketplace platform for vacation rental homes, for an undisclosed amount. This acquisition gives Revnest access to over 30 million global hotel and short-term rental listings.