First came the eVTOL hype. Then came the startups, the investments, the prototype development, the vertiport planning.
At this point, designs are being honed and there’s steady progress toward type certification. Battery and hydrogen fuel cell research and development have never been more intensive. Plans for eVTOL pilot training and certification are taking shape. Vertiport construction is just about underway in several parts of the world.
The clock is rapidly winding down to advance air mobility’s (AAM) arrival. But as the first eVTOL flights approach and industry scale-up remains likely five to 10 years away, the question looms large — how will companies make a profit at the beginning?
Many eVTOL companies have put a great deal of thought into determining the best strategy to make air taxi flights affordable for consumers at the start of operations while still earning revenue. Some have courted military partnerships, and some have focused on cargo transport.
But while there are many uncertainties surrounding profitability in the developing AAM sector, most — including Sergio Cecutta at Arizona-based SMG Consulting — believe that eVTOL companies offering public transport will be able to count on huge demand.
He has no doubt that at the start of the AAM era, the public’s desire to take an eVTOL flight will outstrip the supply of flights available. “OEMs will not be able to manufacture all the vehicles the market will demand,” he said.
Specific markets
In that high-demand environment, Cecutta foresees that operators will choose the most lucrative markets, and choose to operate in cities interested in AAM services and willing to invest in them.
Abu Dhabi, the capital of the United Arab Emirates (UAE), may be the most supportive city in the world. In late April, the city government made another announcement related to AAM, signing framework agreements with both Archer Aviation and Joby Aviation to further advance plans to launch eVTOL air taxi services.
(And there seems little doubt that air taxi services will take precedence over developing the sightseeing-tour market. As Cecutta noted, while sightseeing is a simple market with minimal infrastructure needs and an existing demand, “it’s also a limited market with a significantly smaller upside potential than airport shuttle flights. We think this type of shuttle flight will be the bread and butter of most of the initial air taxi services.”)
In terms of making a profit with flights, Archer’s intention is to offer a direct-to-consumer aerial ridesharing service in highly populated cities. In parallel, it also intends to make profits through sales of its aircraft to other operators.
Regarding aircraft sales, Nikhil Goel, Archer’s chief commercial officer, noted that over the last several years, Archer has already announced a number of industry firsts related to both orders and pre-delivery payments from major airlines and strategic operators around the world.
“Our indicative order book now totals up to 700 aircraft worth up to $3.5 billion,” Goel shared. “We are focused on being able to deliver aircraft against these orders so we can generate significant revenue as soon as possible.”
For flights, Goel said that “as we begin operations, we are targeting airport-to-city center routes with strong existing demand and infrastructure to ensure we can provide an efficient end-to-end travel experience and scale operations with additional branch routes from there.”
In the U.S., Archer will continue to work closely with its strategic partner United Airlines to launch in American cities, starting with United Airlines hubs in New York City, Los Angeles and the San Francisco Bay Area.
Internationally, Archer has focused on the UAE and India. “We believe the UAE will likely be the first international market to adopt electric flying taxis, and we believe India will be the largest market globally,” Goel said.
Archer’s agreement with the Abu Dhabi government outlines Archer’s plans to launch air taxi operations across the region by 2026. In addition, private aviation operator Air Chateau International plans to purchase up to 100 of Archer’s Midnight aircraft and operate them in the Abu Dhabi area.
Meanwhile in India, Eve Air Mobility and Hunch Mobility, a joint venture between Hunch Ventures and Blade Air Mobility Inc., announced in November 2023 that they had begun working together to bring first eVTOL commuter flights to the city of Bangalore.
Bangalore is one of the world’s most-populated and congested cities with more than 13 million residents. The partnership kicks off with a three-month-long pilot project conducting intracity helicopter flights to collect data on operations and customer experiences, informing further development of Eve’s eVTOL aircraft, its air traffic management solution, and more.
Air taxi fares
Cecutta and his colleagues see two options to increase affordability of fares for eVTOL flights in the short term: subsidies and bundling — but there are substantial risks with the first option.
Subsidies are an easy way to reduce fares, Cecutta said, but dangerous as they will eat in the company profitability and might push startups into needing to raise more capital. On the other hand, he noted that “bundling is an option available to airlines, for example, that can make the price of the air taxi trip disappear as an add-on to a premium fare.”
For Archer, the goal is flights offered at prices that are competitive with ground-based ride share and therefore, affordable for the general public, which allows it to reach the ultimate goal of mass adoption of eVTOL aircraft.
“This is why we’ve built our business with a focus on commercialization at scale,” Goel said. “With scale manufacturing and operations, cost comes down and the savings are passed on to the consumer.”
Biggest concerns
In Cecutta’s view, of all the factors affecting profitability, the biggest concerns for eVTOL firms will be the costs associated with the operations of the vehicles, especially the battery costs and landing fees. These may be difficult for companies to predict, he said.
What will make perhaps the biggest difference will be the city/government support to help facilitate the introduction of air taxi services. “Support will probably come in the form of financial support for the infrastructure/landing fees, electricity and tax breaks,” Cecutta said.
He went as far as to say that “we see this multi-faceted support from a city as one of the main reasons why Dubai will be the first city worldwide with commercial air taxi services.”
When asked about its biggest perceived future profitability barriers, Goel suggested that with the population and conditions in cities around the world being what they are now, and those conditions sharpening day by day, profitability of AAM seems all but assured.
Goel pointed to a Morgan Stanley prediction that urban air mobility will be a $66-billion market by 2035, and a $1-trillion market by 2040.
“The reality of life in most cities today includes long, arduous transport times even for short car trips, and an infrastructure increasingly strained to meet the ever-growing demand for transportation services,” Goel said. “All the while, emissions from ground transport vehicles continue to pollute these densely-packed areas. We’re focused on solving this challenge by utilizing our technology for a transportation solution that is safe, low noise, sustainable primarily for urban air mobility but also to serve medical, cargo, tourism and other needs.”