By Julia Norsetter, Manoj Purush and Simon Spells, Reed Smith LLP
The aviation industry has had significant shifts in the profitability of different sectors over the past several years. The COVID pandemic brought a significant decline in air passenger travel, but rapid growth in the air freight market as e‑commerce rose significantly.
It was no surprise, then, to see an increase in investment activity in air freight, as operations turned record profits. Since air freight represented a new sector of aviation for a significant number of investors, last year we provided advice on key considerations for joint venture investments in the industry. As we look towards 2023, aviation investors desire to seek more environmentally friendly targets and we are seeing an increase in interest in another new sector of aviation: advanced air mobility,
or “AAM.”
In the near term, many manufacturers are focusing their developments on electric vertical-takeoff-and-landing aircraft (eVTOL) for passenger or cargo carriage. A myriad of manufacturers are seeking to enter the eVTOL market, with significant investment already occurring. For example, market leaders like Joby Aviation and Lilium reported in 2021 investments of 1.6 billion and 1.2 billion USD respectively.
Aviation investment: eVTOL and advanced air mobility
Similar to air freight, investors are seeking to form joint ventures with industry players who are proposing to bring new technological advancements to the eVTOL sector.
As with any joint venture, investors will need to clearly delineate the parameters of partnerships entered into, such as establishing the long-term objective of the joint venture, ownership of IP and data developed, ratchets, an exit strategy, and control of the enterprise. Other important considerations include choosing the most tax-efficient structure for developing the joint venture as well as determining
future funding needs and obligations.
Investment in a business that is looking to undertake development of new technology brings different considerations for investors who will find that traditional forms of control in such joint ventures may have limited practical effectiveness when the ‘chef has different considerations for how he/she wishes to run the restaurant’.
One aspect of eVTOL investment that is distinct from passenger and freight is the manufacture and operation of the aircraft itself is still in a very nascent stage. At least initially, nations will have unique aircraft certification requirements for eVTOL aircraft, even though they may aspire to work towards harmonisation for the sake of industry development.
Accordingly, asset investors and owners will need to monitor an eVTOL’s certification progress—that is, in which nation(s) an aircraft is certified to fly. If an aircraft is certified by EASA for operations in the European Union, that aircraft will not be readily operable in the United States without an additional certification from the Federal Aviation Administration.
Simply put, ensuring portability of an asset should be a key consideration for investment as it would have a direct impact on potential growth of the business.
Market readiness: Singapore and Southeast Asia
In our quest to advise on profitable investment opportunities, we note that certain nations are demonstrating key components of market readiness for eVTOL operations. The European Union, Australia, the United States, and Asia are all striving to be the first to host eVTOL operations; after all, the benefits of eVTOL operations will be seen on many fronts, including economic, environmental, and social.
Several eVTOL manufacturers have set their near-term sights on countries in Southeast Asia and Singapore in particular, as particularly ripe for swift regulatory development enabling eVTOL operations.
Indeed, the Singapore civil aviation authority’s current National Aviation Safety Plan includes a goal to develop a regulatory framework for eVTOL aircraft and vertiport operations by 2023. Urban issues like congestion and road pollution likely contribute to the Asia-Pacific region’s keen interest in enabling eVTOL use.
eVTOL manufacturers are taking note of the opportunities in Southeast Asia. For example, Volocopter entered into agreements with the Singapore government in 2022 to establish an advanced air mobility development park. Following a recent visit to Singapore, the manufacturer reiterated its intent to become the world’s first urban air mobility (UAM) provider in 2024, at the Olympic Games in Paris.
Singapore’s agreement with Volocopter for a development park will provide the its government
with feasibility information relating about a planned facility for eVTOL maintenance, repair and
overhaul activities in Singapore.
This initiative coincides with Volocopter’s intent to build six vertiports in Singapore by 2030. In addition to the agreement with Volocopter, the Singapore government has demonstrated its commitment to eVTOLs, including by hosting a crewed public test flight over the country’s Marina Bay in 2019.
Other countries in Southeast Asia such as China, Japan, and South Korea have all engage with eVTOL manufacturers seeking to provide services and infrastructure for AAM and eVTOL operations.


