Q&A: Sergio Cecutta of SMG Consulting offers more insight into release of its AAM Reality Index

At the end of last year, SMG Con­sult­ing released its Advanced Air Mobil­i­ty (AAM) Real­i­ty Index, a rat­ing tool that describes the like­li­hood of an eVTOL air­craft OEM to cer­ti­fy its air­craft, enter ser­vice and pro­duce thou­sands of units per year.

At launch, it rat­ed 14 com­pa­nies which includ­ed the likes of EHang, Joby Avi­a­tion, Lil­i­um, Volo­copter and Wisk. To get more detail of the index, the back­ground behind cre­at­ing it and the plans going for­ward, we spoke to Ser­gio Cecut­ta, part­ner at SMG Con­sult­ing.

Q: Con­grat­u­la­tions to you and your team on putting togeth­er the AAM Real­i­ty Index, Ser­gio. Can you tell me more about why you cre­at­ed it?

Ser­gio Cecut­ta: “The whole idea behind the AAM Real­i­ty Index came when we start­ed to see more and more entrants come into the indus­try. While we believe there is a set of entrants that are mak­ing more progress, there is what we call a long tail of addi­tion­al ones.

“At the same time, we start­ed to won­der: while it is clear who are the top two or three, what about all the oth­er com­pa­nies which are receiv­ing invest­ment or build­ing and fly­ing vehi­cles; how do they com­pare to each oth­er?

“And also, the idea behind the index wasn’t to give a snap­shot right now of which com­pa­nies are the ones with the most progress. It was which are the ones that are actu­al­ly going to pro­duce and cer­ti­fy these vehi­cles, pro­duce thou­sands of them as we have heard from their busi­ness cas­es. 

“So it is to not give a snap­shot of the race, as a lot of peo­ple are doing. We want­ed to pre­dict what would be the arrival order of each com­pa­ny at this spe­cif­ic time when it comes to pro­duc­ing and putting into ser­vice these air­craft.”

Q: How much of an impact do you think the AAM Real­i­ty Index can have on the indus­try, not just this year, but when we might start to see the first com­mer­cial air taxi ser­vices?

SC: “The hope is to demys­ti­fy a lit­tle bit the indus­try to peo­ple who are new to it. While we have seen a lot of strate­gic invest­ment, there is still a lot of mon­ey sit­ting on the side­lines because they want to bet­ter under­stand what is going on

“One of the ideas behind the index is to pro­vide a lit­tle bit of guid­ance to new entrants in the indus­try, either an investor or sup­pli­er that hasn’t decid­ed whether they want to par­tic­i­pate in the indus­try or not. It gives them an idea of which folks they should start talk­ing to.

“The oth­er hope is that some­thing like this attracts even more inter­est to the indus­try and the right play­ers. We want to make sure that we broad­cast to the world which com­pa­nies have the most poten­tial, so the invest­ment goes in the right places.

Q: The urban air mobil­i­ty mar­ket is accel­er­at­ing at a rapid pace, with the recent announce­ments from both Joby Avi­a­tion in the US, and Volo­copter in Europe. The tim­ing of the AAM Real­i­ty Index couldn’t have been bet­ter.

SC: “We felt the index was some­thing that was miss­ing and would tell new entrants: ‘who should we com­pare our­selves to? When I enter the mar­ket, should I com­pare myself to com­pa­ny ABC or com­pa­ny XYZ?’ To me, that is anoth­er thing for com­pa­nies to strive for, which man­u­fac­tur­ers are the ones I want to bench­mark myself against. 

“One of the oth­er goals is that we would like to expand the AAM Real­i­ty Index to oth­er parts of the ecosys­tem. Right now, we’ve start­ed with the OEMs because it is the field that has many entrants.

“But in the future, we would like to move to oth­er parts of the ecosys­tem. The rea­son we haven’t done it yet is because they do not have the same lev­el of matu­ri­ty as the OEM side. Imag­ine if we went back five years and did the AAM Real­i­ty Index, it would not be as mean­ing­ful as it is today because we would have a lot less entrants and infor­ma­tion and progress.

“The end goal is for the real­i­ty index to be a point of ref­er­ence for every sin­gle piece of the indus­try and it is some­thing that we want to grow over time. We want to pro­vide in-depth infor­ma­tion on a spe­cif­ic area that peo­ple grav­i­tate towards and then move for­ward towards oth­er areas of the ecosys­tem, rather than give a lit­tle bit of infor­ma­tion on every­thing.”

Q: The AAM Real­i­ty Index was launched at the end of last year. What has ear­ly feed­back been like, because this is some­thing that hasn’t been done before?

SC: “I think until now, no-one has tried to look at the indus­try this way and we have had dif­fer­ent kinds of reac­tions. You can put them in three buck­ets. There is one which peo­ple say: ‘This is great and we like it, but we are not going to com­ment on it because our devel­op­ment is being kept pri­vate. At the same time, this is a great tool.’

“We’ve had oth­er folks come out and say this is a great tool and we want to talk to you. This is one of the ideas behind the index right now: if you think that we don’t have enough infor­ma­tion, come and tell us. Don’t tell us that you should be ranked high­er because again, this is not a pay-for-place­ment. We’re mak­ing sure we’re inde­pen­dent from all of the man­u­fac­tur­ers, oth­er­wise it would be a con­flict of inter­est. We want to be the cred­it score of the indus­try. 

“The last buck­et is the peo­ple who do not believe in the index because they don’t believe in the rank­ing — not the fun­da­men­tals behind it but the rank­ing itself. To some of these peo­ple, my answer has been that I am actu­al­ly glad and pleased that we agree on which com­pa­nies should be in the top ten. Then the rank­ing depends on what para­me­ters you look at, but the fact we have the same top ten — that’s great progress.

“But in gen­er­al, feed­back has been very pos­i­tive and we have been work­ing with sev­er­al of the OEMs not only to refine the index but also to include new entrants. Again, the idea is to add more com­pa­nies but we are very cog­nizant that we want to stop at a small num­ber because this is not a top 100 index. 

“We want to make sure that we’re only look­ing at the com­pa­nies which can get all the way to the end. While we want to add more, and we will, but we do not have plans to go through the entire ecosys­tem — some 200–300 com­pa­nies and rank them all.

Q: With that in mind, you launched the AAM Real­i­ty Index with 14 com­pa­nies. Is there a par­tic­u­lar num­ber you want to reach with OEMs?

SC: “I think we are hap­py with the 14 because these are the com­pa­nies we are watch­ing. But there are a few more, so I would fore­see the index grow­ing to about 20. But unless there are some big changes in the future that we haven’t seen yet with com­pa­nies com­ing in and invest­ing a ton of mon­ey, I think 20 could be a good num­ber.

 “Just to go back to the idea of the AAM Real­i­ty Index, two things real­ly pushed us through­out the devel­op­ment: One was to cre­ate some­thing that was data-dri­ven. 

“The idea was to select ele­ments that we can mea­sure and if we could share the entire for­mu­la behind it, which we can’t, you will see it is pure­ly data-dri­ven and takes out any sen­ti­ment or per­son­al belief. To the point that when it first came out there were sur­pris­es as well. Every­one has their horse in the race — either because they believe in the busi­ness case or like the vehi­cle. 

“The rea­son for pick­ing num­bers was for sim­plic­i­ty. At the very begin­ning, we were think­ing of an inte­ger num­ber with no dec­i­mal point. But then we saw, due to the nature of this indus­try, clus­ter­ing around spe­cif­ic mile­stones and so couldn’t dis­tin­guish com­pa­nies. They were all sev­ens or fives.

“We intro­duced this addi­tion­al dec­i­mal point just to give it more of a dif­fer­ence, but the idea behind one num­ber is that if you as an OEM want to give us more infor­ma­tion — even if it might not be pub­licly avail­able — we can incor­po­rate it with­out giv­ing away any secrets. It was impor­tant to give this con­fi­dence to the OEMs that a refine­ment of the grad­ing would not lead to any prob­lems as far as keep­ing their secrets.”

Q: What would be your plans going for­ward, in regards to cre­at­ing an index for the oth­er parts of the ecosys­tem?

SC: “That will be a lit­tle bit of wait and see. We want to under­stand when there is enough crit­i­cal mass for anoth­er piece of the index to come out. I don’t think it’s use­ful to any­one to say that there are four com­pa­nies which are doing infra­struc­ture and here is how we are going to rank them.

“We want to wait for the ecosys­tem to nat­u­ral­ly grow and then we can decide and select an area to study in-detail. It is one of those chick­en and egg sit­u­a­tions: we don’t want to be too late with pro­vid­ing some use­ful infor­ma­tion but at the same time, we don’t want to be too ear­ly. If there is not enough data out there, there is no index.”

Q: How many times will this index be updat­ed? Is this some­thing that will be done quar­ter­ly, month­ly etc.

SC: “The whole idea behind this is that it is a liv­ing index, so it is not some­thing that is going to stay frozen. We don’t want to have an update fre­quen­cy that is month­ly or quar­ter­ly or annu­al­ly. It is more of a pool­ing of infor­ma­tion; the moment there is infor­ma­tion com­ing out, we want to make sure it is incor­po­rat­ed and a new ver­sion of the index comes out. 

“It doesn’t mean that we will update it every day but again, the update fre­quen­cy that we are think­ing is not to go low­er than month­ly and maybe it is good enough to have a month­ly update. It depends on the infor­ma­tion that is out there.

“For exam­ple, we’re work­ing on the update which will come out next month and takes into account all the infor­ma­tion that has come to light in between pub­lish­ing the index and now. So CES and all of the lat­est news.”

Q: How can eVTOL air­craft devel­op­ers get in touch with you if they want to update their rat­ing?

SC: “We count most of the ecosys­tem as part­ners, so it’s been easy for the major­i­ty of folks to reach back to us through mem­ber­ship of the organ­i­sa­tions which are big in our indus­try — like VFS, the FAA, GAMA and EASA.

“What we have found out through the web­site, is more folks, who are out­side of the indus­try, and who are inter­est­ed in learn­ing more about the index and why a com­pa­ny is ranked in a spe­cif­ic way.”

Q: Is there any­thing else you’d like to add, Ser­gio?

SC: “I think there are two points which are close to my heart. First, it is the data-dri­ven approach, which is one of the rea­sons why we have decid­ed not to incor­po­rate some ele­ments. For exam­ple we do not con­sid­er the markets/missions, as it would be a lit­tle bit disin­gen­u­ous to com­pare a com­pa­ny which is devel­op­ing a mar­ket for a 20-mile mis­sion, with one which is devel­op­ing a 100-mile mis­sion.

“Or the busi­ness case. It is where a lot of non-objec­tiv­i­ty comes in: when peo­ple look at busi­ness cas­es they either believe or don’t believe in the mar­ket assump­tions. We are talk­ing about belief and not some­thing that can be mea­sured.

“The sec­ond piece that is impor­tant is the updates. The beau­ty of the web­site is that it allows us to build up a chan­nel of com­mu­ni­ca­tion. While we don’t want to put future pre­dic­tions in the index and just look at the present, we want to make sure we keep up with the evo­lu­tion of the mar­ket. It is super charged at the moment. Every week, there is always some­thing hap­pen­ing.”

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