Q&A: AIRO Group announces intention to explore possible SPAC merger, discusses future plans for the market

The AIRO Group (AIRO), the urban air mobil­i­ty and drone ecosys­tem com­pa­ny, has engaged with Stephens Inc. to assist in explor­ing a SPAC merg­er.

Its port­fo­lio lever­ages tech­nolo­gies that include data sys­tems, resup­ply pack­age deliv­ery, mil­i­tary aero­space train­ing, mil­i­tary and com­mer­cial manned/unmanned air­craft sys­tems and avion­ics. AIRO is led by aero­space indus­try vet­er­ans with senior lead­er­ship expe­ri­ence at mar­ket-lead­ing firms like Hon­ey­well and major glob­al air­lines. 

To get more detail and hear more about its future plans, eVTOL Insights spoke to AIRO Group CEO Capt. Joe Burns, John Uczekaj, Pres­i­dent and CEO of Aspen Avion­ics and Michael Smith, CEO of VRCO Ltd. These two com­pa­nies form part of AIRO Group’s port­fo­lio, with the lat­ter cur­rent­ly devel­op­ing its four-seater XP4 eVTOL air­craft for per­son­al use.

Q: Are you able to tell us more about the rea­son­ing behind going for a SPAC? Has it always been on the cards?

Capt. Joe Burns: “AIRO Group has been in the works for approx­i­mate­ly two years and was formed with the base com­pa­ny of air drones. And in that time, the larg­er drones and drones becom­ing prac­ti­cal real­i­ties have real­ly hit. What we’ve seen is now a full com­mer­cial accep­tance of small drones for com­mer­cial oper­a­tions. So we’re expand­ing rapid­ly into the larg­er space and into eVTOLs.

“We’ve been doing this roll up with this group of com­pa­nies for just a lit­tle under a year. The SPACs have real­ly kind of come into focus here recent­ly and we’re very much in the mid­dle of it. We’ve been work­ing in that area for quite some time. All these com­pa­nies have very unique pieces in the drone puz­zle, so we’ve start­ed with what we call the drone ecos­phere; so putting every­thing togeth­er to oper­ate the drones from start to fin­ish, the man­u­fac­tur­ing, the train­ing and actu­al drones them­selves.

“I hate to lump drones and eVTOLs togeth­er because there’s a dra­mat­ic dif­fer­ence, but it’s the same tech­nol­o­gy base for us. We’re just mov­ing into the pas­sen­ger area as well.

“We have a nat­ur­al pro­gres­sion where we start­ed with small­er drones and now get­ting into the larg­er car­go ones based on sol­id eVTOL designs such as the XP4. But we want to move into that by tak­ing a step into the car­go realm, get the data sets and fly and oper­ate those com­mer­cial­ly as soon as pos­si­ble. And then work­ing into the pas­sen­ger side. I think it’s a very tough step to go from noth­ing to a full pas­sen­ger air­craft. We have a nat­ur­al pro­gres­sion, but there is a huge, mas­sive untapped mar­ket for car­go oper­a­tions for these types of vehi­cles.”

John Uczekaj: “The AIRO Group has put togeth­er a nice syn­er­gis­tic group of tech­nolo­gies, man­u­fac­tur­ing and sys­tem capa­bil­i­ties. Where many are going after a spe­cif­ic eVTOL or vehi­cle, we’ve real­ly kind of looked at it from an ecos­phere stand­point.

“So we have the ele­ments to pro­vide the man­u­fac­tur­ing, avion­ics, elec­tron­ics, aero­dy­nam­ics, sys­tems and net­work­ing to pro­vide a sin­gle point deliv­ery of pack­ages and car­go. I think this pro­vides us with a lit­tle bit more speed to mar­ket; hav­ing more ver­ti­cal con­trol of the mar­ket space as opposed to oth­ers that are specif­i­cal­ly going at a vehi­cle type thing.

“And it also allows us to grow incre­men­tal­ly. Many of these big steps into eVTOL are very large and high risk plays. Not just from a tech­nol­o­gy stand­point, but from cer­tifi­cate valid­i­ty, accept­abil­i­ty and train­ing too. All these ele­ments have to be added, so AIRO Group took much more of an inte­grat­ed approach to allow for accep­tance of dif­fer­ent tech­nolo­gies and dif­fer­ent deliv­ery sys­tems, as soci­ety and reg­u­la­tions and just eco­nom­ics allow for it. We like to go for the Big Apple in the sky and go for it. AIRO has tak­en an attack that’s much more incre­men­tal and we believe in the end it will be suc­cess­ful.”

Q: What are your plans going for­ward?

JB: “So as you know, there’s a lot of process involved in going down the SPAC route. There are things like the audits that have to take place and the val­u­a­tion exer­cis­es, which we’ve done most of that heavy lift­ing. And then in our par­tic­u­lar case, doing the defen­dant merg­er agree­ments between the enti­ties, because SPACs can’t can’t bring in mul­ti­ple enti­ties. They have to bring one major and you can bring in small­er ones beyond that.

“So for us, it would be to do that heavy lift­ing of all the non-fly­ing stuff, the finan­cial bits that need­ed to take place. It was real­ly crit­i­cal to get to this point. Now we know we’re in it, we’re in a posi­tion that we were able to go in and talk to a SPAC with author­i­ty and say we have done X, Y and Z, we’re ready to go to the next steps. And that’s very use­ful for us at this point in time.”

JU: “The SPAC world is evolv­ing and the num­ber that have come into real­i­sa­tion in the last four months is remark­able. The key to being suc­cess­ful in our view of the SPACE is hav­ing every­thing in place. As Joe said, this turnkey men­tal­i­ty where we have the com­pa­nies are all engag­ing in signed defin­i­tive agree­ments. We have audits ready to go, we’re work­ing all those things that allow for a SPAC to move quick­ly with us.

“We’re in active con­ver­sa­tions with Stephens to do that and expect to move at a fair­ly good place through the first half of the year, because of the atten­tion on the eVTOL mar­ket after Joby Avi­a­tion and Archer. Every­body’s tak­ing a cer­tain path to achieve the nec­es­sary fund­ing and take it to the next lev­el. We’ve cho­sen this way and think we’re well posi­tioned to move quick­ly into some sort of agree­ment, and then be oper­at­ing as a sin­gle com­pa­ny in this cal­en­dar year.”

Q: Mike, you must be very excit­ed about the poten­tial of a SPAC merg­er, giv­en all the work you’ve been doing with your com­pa­ny VRCO?

Michael Smith: “I found­ed the com­pa­ny in 2015 after com­ing from the drone indus­try from about 2007 to 2008 onwards. So I’ve kind of seen it evolve and the dif­fer­ent flavours of bat­ter­ies, the dif­fer­ent flavours of motors and every­thing you can pos­si­bly think of. We launched our Xcraft XP2 design at the Good­wood Fes­ti­val of Speed in 2017 and co-exhib­it­ed with Air­bus & PAL‑V and a huge range of tech­nolo­gies.

“And I have to say, I think the attrac­tion a lot of peo­ple had was to a machine that they’ve thought iden­ti­fied a kind of lifestyle with­in which was either lux­u­ry or high speed, or cer­tain­ly for some it was about safe­ty. There was the Air­bus pop-up machine and it’s turned out to be crazy. We have a bonafide lux­u­ry brand that just hap­pens to be 100 years old, work­ing with us and the com­fort of being in the envi­ron­ment that’s vast­ly dif­fer­ent from some­thing that would be a low­er cost vehi­cle, for exam­ple.

“So that’s the mar­ket that we’re going after. And we have quite exclu­sive access to it. Because of these part­ner­ships and because of the look, feel and flavour of the vehi­cle. Its abil­i­ty to be very com­pat­i­ble with the marine envi­ron­ment, land on water etc. It actu­al­ly does fold up in one of the ver­sions and stays below deck, which not a lot of peo­ple know about or see.

“We’ve thought all these things through and about how we go and get a very high per­cent­age of mar­ket share in spe­cif­ic mar­kets. While at the same time, hav­ing a huge world of oppor­tu­ni­ties open up for us by par­tic­i­pat­ing in AERO. Sud­den­ly, there’s a dual use for the air­frame; it’s not just about car­ry­ing peo­ple but car­ry­ing car­go. That air­frame is more or less ready now to go into pro­to­type, which is what we’re doing for car­go. With the influ­ence of AIRO, we have found there’s addi­tion­al util­i­ty for the full size air­frame plus some of the air­frames at sub­scale.

“And we’ve had phe­nom­e­nal inter­est, open­ing up the pos­si­bil­i­ty of using car­go. And pret­ty much any­body who’s out there who wants to think about any­thing air car­go is going to want to look at an air­frame with our kind of per­for­mance. The world’s going to change and I think being a part of AIRO already puts us into the frame. It puts us on cen­tre stage in some of these deliv­ery sit­u­a­tions. And then on top of that is the hyper lux­u­ry side, and that’s where we’re real­ly going to dom­i­nate.”

JB: “One point that I think is real­ly crit­i­cal is the safe­ty aspect. These things have got to be unbe­liev­ably safe and you have to have that safe­ty back­ground and build around that and move upward ver­sus just start­ing from scratch. Then bring­ing all these teams togeth­er is real­ly impor­tant for that for us, because we have that back­ground and 100,000s of hours of prod­ucts and ser­vice and manned flight time. The key for us is to build this thing like any oth­er manned sys­tem with unbe­liev­able safe­ty mar­gins.”

Q: With all the com­pa­nies involved in AIRO Group, it makes a SPAC merg­er a real­ly excit­ing propo­si­tion for investors does­n’t it?

MS: “It is and in terms of the col­lab­o­ra­tions, we start­ed to have some pret­ty pro­duc­tive con­ver­sa­tions with John and his team about how we can utilise their avion­ics, which we’re going to be doing exclu­sive­ly with­in our air­frames for pas­sen­ger trans­port. We’re look­ing at ways we can improve on things that exist and invent new things where they don’t exist.

“So there’s that kind of oppor­tu­ni­ty you just don’t get by hav­ing out­side part­ners. When you’re work­ing effec­tive­ly as one sin­gle unit, the band­width of infor­ma­tion and ideas that you exchange freely is expo­nen­tial. And that’s where the accel­er­a­tion comes in, those addi­tion­al returns for investors and high growth and that’s how I think we’re going to beat a lot of these com­pa­nies which pos­si­bly have a head start on us with huge chunks of mon­ey. They’re not able to have the cohe­sive devel­op­ment that we have. And we’ve been devel­op­ing and will actu­al­ly per­fect a thing. So you’re right, it’s very excit­ing.”

Q: In going pub­lic, what advan­tages do you think this will give AIRO group and its port­fo­lio com­pa­nies?

JB: “We’ve looked exten­sive­ly at the syn­er­gies involved. And it’s pret­ty amaz­ing. We’re already see­ing the abil­i­ty to go in and get a prod­uct and an air­craft that we don’t have to go out and put out a bid for, we can actu­al­ly man­u­fac­ture it inter­nal­ly.

If there’s a safe­ty issue, we can go to the safe­ty issue thing right away. And from a train­ing per­spec­tive, we have all the train­ing capa­bil­i­ty in-house. So we’re see­ing huge oppor­tu­ni­ties; for any­body else that is start­ing with a sin­gle prod­uct, they’re going to have to go out­side for every­thing and it takes a long time. It adds a lot to that chain and we already got it in one of our oth­er enti­ties. So for us, it real­ly does add just a tremen­dous amount of val­ue.

JU: “And going pub­lic has all kinds of advan­tages. When you have those kinds of syn­er­gies you can cre­ate very attrac­tive finan­cials for investors, which then cre­ates addi­tion­al cap­i­tal for invest­ing growth and allows you to grow quick­er. So for these com­pa­nies that have maybe a sin­gu­lar focus, they have to get into con­tracts with third par­ties, that takes time and mon­ey.

“Where we are, we’re much more effi­cient in terms of both cost and speed, which makes it very attrac­tive in the cap­i­tal mar­ket. And that attracts investors, which then attracts more cap­i­tal for fur­ther growth and expan­sion. And so the pub­lic mar­ket for a com­pa­ny like ours is very attrac­tive for those rea­sons.

“We all know that once you get in the pub­lic mar­ket, the scruti­ny of your finan­cials and every­thing you do comes under a very tight micro­scope. And being able to show syn­er­gies that go to the bot­tom line while you’re devel­op­ing these high growth new prod­ucts, is a very attrac­tive sto­ry for not only insti­tu­tion­al investors, but reg­u­lar investors that are out there invest­ing in Tes­la or Ama­zon. Hav­ing a good bot­tom line and a good growth path in these strate­gies is a crit­i­cal piece for being suc­cess­ful in the pub­lic mar­kets. A

“And I think the way we’ve struc­tured AIRO pro­vides for that con­tin­ued growth and con­tin­ued per­for­mance that will keep investors focused on us and con­tin­ue the growth.”

Q: Does AIRO Group have a prod­uct that it intends to bring to mar­ket?

JB: “We do. It’s a vari­ety of things from small UAS sys­tems to drones as a ser­vice — which is a big part of what we do already today — to man­u­fac­tur­ing of spe­cial drones, whether it would be for com­mer­cial use or oth­er uses. We have a big roadmap to inte­grate AI into all of our prod­ucts and have a group to do that, and then we have a group that is plan­ning for a prod­uct which is the actu­al VPN that all these vehi­cles are going to need to com­mu­ni­cate data and get it back and forth.

“So it’s not just a focus on a sin­gle prod­uct. It’s the whole sys­tem around the ecos­phere that actu­al­ly sup­ports this and for oth­er enti­ties as well. Every­body’s going to need to have com­mu­ni­ca­tions ves­sels and the plan is to do that and then the soft­ware to oper­ate it. So there’s a big plan and we have a pret­ty exten­sive roadmap, but there are a lot of prod­ucts involved.”

Q: We’re start­ing to see a lot of excite­ment with SPACs at the moment, espe­cial­ly after the recent deals for Joby Avi­a­tion and Archer. It seems like it’s good tim­ing for this announce­ment.

JU: “When SPACs first came out, there seemed to be a lot of atten­tion on EV vehi­cles; elec­tric cars, dri­ve­trains and LIDAR-type activ­i­ties. And what we’re see­ing is a bit of a piv­ot of the SPAC inter­est into the eVTOL and drone ecos­phere. And the tim­ing of that is quite nice for AIRO because of the effect of peo­ple’s atten­tion towards this space as the next high growth space.

“The real­i­ty is that the tim­ing is excel­lent for a com­pa­ny like AIRO and we’d like to exploit that tim­ing to be able to pro­vide the fund­ing we need. So we’re hop­ing that will be a very suc­cess­ful approach for us. And as we grow quick­ly, we hope to pro­vide some returns to our investors right off the bat.”

JB: “I think the tim­ing on prof­itabil­i­ty is ulti­mate­ly pret­ty impor­tant too. If I look at sin­gle stream com­pa­nies, it’s a long time between now and when the expect­ed first flights of the actu­al cer­ti­fied vehi­cle is going to be. We have an entire pack­age of prod­ucts that are already gen­er­at­ing rev­enue and will con­tin­ue to grow through­out that process. We’re not wait­ing for some trig­ger­ing event three, four or five years from now. we’re actu­al­ly gen­er­at­ing rev­enues in gen­er­al now, it will be able to grow dra­mat­i­cal­ly because of that.”

Q: Any­thing else you’d like to add, Michael?

MS: “The launch pad moment for us will be when we get to mar­ket with a ful­ly cer­ti­fied air­frame that’s in pro­duc­tion sat­is­fy­ing orders. That’s 2025, so a key to the suc­cess of VRCO in this form of accel­er­a­tion is hav­ing the strength of the group and strength of AIRO to rely on and mem­bers with­in the group that are already gen­er­at­ing a good amount of rev­enue.

“And then to com­ple­ment that is the sub-scale air­frames, which we’ll be putting in for var­i­ous dif­fer­ent types of cus­tomers, includ­ing our­selves, oper­at­ing var­i­ous types of con­tracts, deliv­er­ing goods on behalf of logis­tic com­pa­nies peo­ple like Ama­zon, for exam­ple.

“So all in all, I think you have these macro eco­nom­ic fac­tors that don’t always align, and maybe once in a life­time they do. And this is where we’re at; the align­ment of manned and unmanned tech­nol­o­gy to sup­port it, which is now ready and most­ly mature. The abil­i­ty for the bat­tery tech­nol­o­gy to sat­is­fy real world use cas­es and oper­at­ing rev­enue and to sus­tain that.

“And all of that stuff gets bet­ter over time. More jour­neys get unlocked, more tech­nolo­gies and air­craft are required. What we’re going through now is like when we were get­ting into motor vehi­cles, we’re now get­ting out of motor vehi­cles and going up into the sky. And it’s going to be huge­ly excit­ing and there could­n’t be a bet­ter time for investors to be invest­ed into the space.”