While the Advanced Air Mobility (AAM) industry is far from mature, the investment climate around the sector is maturing, with returns only likely in the 2030s.
A panel discussion at the Rotorcraft Asia event in Singapore on 5 May explored the topic about when AAM bets will eventually pay off.
Teo Hui Ling, a partner at law firm Reed Smith, cited projections that the AAM sector is currently valued at $8.9 billion, and that this will rise to $45 billion by 2030.
She said that venture capital and private equity have played a role financing the sector, as well as special purpose acquisition companies, or SPACs.
Professor James Wang of Singapore’s Nanyang Technological University observed that early investments in eVTOL (electric vertical take-off) vehicles were made by wealthy entrepreneurs in the mid-2010s. Generally, they had no aerospace experience, but hailed from the technology sector.
More recently, major aerospace companies and car manufacturers have invested in the sector, bringing expertise and talent. Later, as the AAM industry matures, he expects sovereign wealth funds to get more involved.
He also cited the substantial costs involved in entering the industry and the shortage of skilled rotorcraft designers.
“One billion dollars barely gets you in the door,” he says. “No money, no party…you need the money to poach [skilled people] to come work for you. If you don’t have a good designer, you won’t get venture capital. It’s a cat and mouse game.”
Also speaking on the panel was Min Shin, chief executive officer of South Korean start-up Moviation. While Moviation’s long-term plan is to operate eVTOLs on a commercial basis in South Korea, initially Moviation will use helicopters. In addition to helping establish the business model, this will help drive revenues.
“A lot of the operations and teams and the customer flow will probably be similar to eVTOLs,” said Shin.
In addition to early revenues from passengers, Shin said there will also be funding available through government subsidies – Seoul is eager to build South Korea’s eVTOL industry. Moreover, Moviation wants to work with other companies in the AAM sector to create projects that can secure government funding, thus providing additional revenue streams.
On the topic of returns, Joshua Ng of Alton Aviation Consultancy noteds that the return profile will vary for different parts of the AAM industry, such as manufacturers, operators, and lessors. He also warns that the focus tends to be on 2025, when the first basic eVTOL operations are launch, but that the industry will only mature many years beyond this.
Ng feels that returns might only be forthcoming in the 2030s, and that since the industry is still in its infancy, some players may lack the cash to survive for that long.