By Ashleigh Standen, Reed Smith’s Transportation Industry Group.
The sums invested in the development of eVTOL aircraft have been well publicised. It seems that not a week goes by without a new partnership announcement, a new SPAC combination, or another large investment being reported in the press – such as the additional $450 million being invested by Boeing in Wisk, announced at the end of last month.
The Financial Times recently referred to a McKinsey finding that ‘investors have bought into the dream, pumping more than $7 billion into such projects, mainly through special purpose acquisition vehicles (SPACs) listed on US stock markets,’ .
The article goes on to note that ‘while all kinds of vehicles are planned, from cargo planes to surveillance drones, almost 75 per cent of the money went to companies developing manned electric vertical take-off and landing (eVTOL) craft.’
It is much harder to find figures reporting where the other 25 per cent goes, or on investment in the physical infrastructure (in addition to air traffic management systems, insurance products, etc.) that will enable people to actually use these aircraft when available – this infrastructure being primarily vertiports and charging stations.
On this basis there seems to be a gap between investment in the aircraft and investment in the aircraft support networks, suggesting that there is a risk that even if eVTOL aircraft are developed and certified for passenger travel from 2023, the infrastructure to enable them to be used will be several years behind. This weakens the use case for eVTOL aircraft themselves, reduces the likelihood of public acceptance building demand for the product, and makes them a less attractive investment proposition overall.
But what are vertiports?
Like airports, vertiports will be a congregation of customer and model-agnostic electric aircraft and advanced air mobility support services, from ticketing, boarding and loading to charging and maintenance. McKinsey describes three main varieties of vertiport as:
· ‘Vertihubs’, being the largest and most complex variation, as a standalone structure including multiple spaces for take-off, landing and parking, maintenance and potential retail facilities, costing an estimated $6 million – $7 million to construct and $15 million – $17 million annually to operate;
· ‘Vertibases’, which could be newbuilds or fitted onto existing rooftops, and would have about three spaces for take-off, landing and parking and maintenance. These would cost an estimated $500,000-$800,000 in construction and $3 million – $5 million annually to operate; and
· ‘Vertipads’, being the smallest of the varieties. Like vertibases these could also be newbuilds or retrofits, with a single take-off and landing space and limited space for parking or maintenance. These are estimated to cost $200,000 – $400,000 in construction and $600,000 – $900,000 annually to operate.
A reasonable amount of lead time will be needed to establish locations for these infrastructure modules, particularly where they are to be retrofitted onto existing buildings (such as urban railways stations, residential buildings, car parks, shopping centres, office towers, etc.), even if the construction can be completed relatively swiftly.
Whether vertiports are considered assets or liabilities by landlords will depend on the noise eVTOL aircraft ultimately generate, whether changes are needed to make the facilities more accessible to new users of the property, the effect on local traffic, the sophistication of air traffic management systems, and so on – so there is a substantial ‘socialising’ process to be worked through here to ensure vertiports are accepted within the communities they are intended to serve.
An attractive asset class…?
Vertiports might well be attractive investments because, as co-founder and CEO of Skyports, Duncan Walker, has observed, while the eVTOL aircraft themselves will either succeed or fail based on whether or not they receive certification, model-agnostic infrastructure is not dependent on a single piece of technology: ‘Companies supporting the ecosystem are attractive investment propositions without single technology bets, which may give them greater potential for success’.
As Electro.Aero’s CTO Josh Portlock described on the ‘eVTOL Insights’ podcast, we have the opportunity in electric aviation to design out problems arising in existing industries, from different plugs being used in different countries, variations in the power available from local grids, the accessibility of charging units for vehicle of different wing spans or rotor blade heights, etc.
For example, learning lessons from the experience of electric cars in particular, the SAE AE-7D Aircraft Energy Storage and Charging Committee is developing standard AS6968, which ‘ensures that electric aircraft can be charged by one consistent internationally-accepted standard, without the regional and brand-specific incompatibilities seen in the automotive industry’.
This means standard-compliant hardware will have to be incorporated across all eVTOL aircraft models, chargers and vertiports. Collaboration between vertiport, charger and aircraft manufacturers at the design and development stage will therefore be critical to ensure that all three are compatible ready to go to market at the same time – which means that investment is needed across these categories, not just into aircraft development.
Money in motion
It seems inevitable that investment in vertiport and supporting infrastructure will ultimately be made, despite any current lag behind investment in the aircraft themselves. Walker forecasts movement in the next 12-18 months, predicting that ‘private equity investors will come first and once the infrastructure proves its steady revenue streams, lower risk investors such as pension funds will come into play in a very big way’.
With purpose-built vertiports able to accommodate local options for green power generation (such as solar and wind) to create the electricity needed to charge the aircraft, be retrofitted to existing structures, and create new jobs in a more sustainable aviation industry, it is easy to see the appeal – provided customer demand materialises in due course – to investors of these assets.
And with powerful voices like the Chairman and CEO of BlackRock urging action in the deployment of capitalism to achieve sustainability, it is to be hoped that momentum in vertiport finance will build to ensure that eVTOL aircraft and their supporting infrastructure are ready to meet the market together.
About the author:
Ashleigh has significant experience in aviation, acting on a range of international transactions for bank and non-bank lenders, lending syndicates and facility agents, lessors and airlines.
She has worked in Sydney, Tokyo and London and has been involved in senior and junior debt financing for aircraft, conventional JOLCO leasing, and engine leasing and finance.
Her role has included negotiating and preparing finance and lease documentation for lenders and lessors, refinancings, manufacturer purchase orders, restructuring security arrangements for lenders dealing with borrowers seeking bankruptcy protection, as well as various sales, purchases, novations and engine swaps.