Europe’s flying taxi dreams falter as cash runs short

PARAPHRASED_TITLE: Financial Challenges Impact European Flying Taxi Development
CATEGORY: Technology
PARAPHRARED_CONTENT:
An electric flying taxi service was anticipated as one of the innovations for this year’s Paris Olympics. Volocopter, a German company, had pledged that its electric-powered, two-seater aircraft, the VoloCity, would transport passengers throughout the city. This service did not materialize; instead, the company conducted demonstration flights.

While missing this deadline caused embarrassment, a more significant issue was unfolding behind the scenes: Volocopter was actively seeking new investment to sustain its operations. Negotiations in April to secure a €100m (£83m; $106m) loan from the government were unsuccessful. Attention has now shifted to China’s Geely, which is reportedly in discussions to acquire an 85% stake in Volocopter for $95m in funding, according to a Bloomberg report. This potential agreement could lead to future manufacturing being relocated to China.

Volocopter is among numerous companies globally engaged in developing electric vertical take-off and landing (EVTOL) aircraft. These machines are designed to offer the versatility of a helicopter without the associated high costs, noise, and emissions. However, the substantial expenses involved in obtaining regulatory approval for such novel aircraft and establishing manufacturing capabilities have prompted some investors to withdraw their support.

Lilium stands out as one of the most prominent companies affected. This German firm had devised an innovative approach to the EVTOL concept. Lilium’s aircraft incorporates 30 electric jets that can be collectively angled to transition between vertical lift and forward flight. The design proved appealing, with the company asserting it had secured orders and memoranda of understanding for 780 jets worldwide. It successfully showcased the technology using a remote-controlled scale model. Construction of the initial full-sized jets had commenced, and testing was scheduled to begin in early 2025.

As recently as July’s Farnborough Airshow, Sebastian Borel, Lilium’s COO, expressed confidence. “We are definitely burning through cash,” he informed the BBC. “But this is a good sign, because it means we are producing the aircraft. We’re going to have three aircraft in production by the end of the year, and we have also raised €1.5bn.” Nevertheless, the company subsequently exhausted its funds.

Lilium had been attempting to secure a €100m loan from the German development bank, KfW. However, this required guarantees from national and state governments, which ultimately did not materialize. In early November, the company initiated insolvency proceedings for its primary operating businesses, and its shares were delisted from the Nasdaq stock exchange.

Currently, development work on the new aircraft persists as the company collaborates with restructuring experts to either sell the business or attract fresh investment. Nonetheless, bringing the new e-jet into production appears more challenging than ever before.

Vertical Aerospace is a notable British participant in the eVTOL sector. Businessman Stephen Fitzpatrick, who also established OVO Energy, founded the Bristol-based company in 2016. Its distinctive VX4 design utilizes eight large propellers mounted on slender, aircraft-style wings to generate lift. Mr. Fitzpatrick has made ambitious assertions regarding the aircraft, suggesting it would be “100 times” safer and quieter than a helicopter, at 20% of the cost.

The company has achieved progress. Following the completion of a remote-controlled testing program, it commenced piloted tests earlier this year. Initially, these tests involved the aircraft being tethered to the ground. In early November, it successfully performed its inaugural untethered take-off and landing.

However, significant setbacks have also occurred. In August of last year, a remotely-piloted prototype sustained severe damage when it crashed during testing at Cotswold Airport, following the detachment of a propeller blade. In May, Rolls Royce, a major engineering partner, withdrew from an agreement to supply electric motors for the aircraft.

Despite these challenges, ambitions remain high. Vertical Aerospace states its intention to deliver 150 aircraft to customers by the end of the decade. By that time, it also anticipates being able to produce 200 units annually and to achieve cash flow break-even.

Yet, the company has navigated financial difficulties and recently finalized a rescue agreement with its largest creditor, US-based Mudrick Capital. Under the terms of this agreement, Mudrick will invest up to $50m in Vertical, while $130m of existing loans from Mudrick will be converted into shares. This transaction will result in the US investment firm holding a 70% stake in Vertical, with Mr. Fitzpatrick’s stake decreasing from 70% to 20%. “This comprehensive deal – alongside the recent piloted flight campaign… means Vertical is positioned to be a winner in one of the 21st century’s most exciting technologies,” Mr. Fitzpatrick declared in a statement accompanying the deal.

Amidst these turbulent conditions, one European initiative is quietly progressing as planned, according to Bjorn Fehrm, an aeronautical engineer who previously piloted combat jets for the Swedish Air Force and now works for aerospace consultancy Leeham.

He suggests that the EVTOL project at Airbus is likely to endure. Named the CityAirbus NextGen, this four-seater aircraft features eight propellers and an 80km range.

“This is a technology project for their engineers, and they’ve got the money, and they’ve got the know how,” Mr. Fehrm states. Globally, other well-funded start-ups, including Joby and Archer in the US, also have a strong likelihood of bringing their aircraft into production.

Once these aircraft are manufactured, the subsequent challenge will be to ascertain if a profitable market exists for them. Initial routes are expected to connect airports and city centers. The question remains whether these operations will generate profit.

“The biggest problem area when it comes to the cost of operation is the pilot and the batteries. You need to change the batteries a couple of times per year,” Mr. Fehrm highlights.

Considering the extensive uncertainty and expenditure, one might question why investors initially committed funds to new electric aircraft. “No one wanted to miss out on the next Tesla,” Mr. Fehrm remarked with a laugh.