EVTOL PROFITABILITY: ‘SLIM CHANCE IN THE CURRENT MARKET’, SAYS EXPERT
There is “little to no chance” of eVTOL aircraft achieving profitability in the current market, due to their high development costs, Brian Flynn, MD, DiamondStream Partners, told Revolution.Aero’s online Town Hall delegates this week (September 1st). It would take the entire world’s venture capital money to fund all 250 or so eVTOL projects under development, according to research by Flynn’s partner Dean Donovan.
Flynn first made the prediction at last years’s Revolution.Aero conference in San Francisco. But nearly a year on, nothing has changed and Covid-19 may have gone some way to re-enforcing the prediction, Flynn told the Town Hall’s 300-plus delegates. .
“So, most of those projects are going to flame out,” said Flynn, “Of those that I could see flying and creating a product, the investment will be paying out until well into the 2030s. With that in mind, you would have to expect that returns on investment would have to be enormous in order to justify the risk. Therefore, I think even those that do make a profit eventually, most of them are not going to be great investments and I haven’t seen one yet that bucks this trend.”
‘Investment returns have to be enormous’
Flynn said he has seen some eVTOL projects that have interesting applications, such as police or medical operations. But those are relatively new markets compared with most eVTOL projects, which focus on general aviation. “But it could be that we get stuck in our own rule,” he added. “We are therefore always open to saying that we could be wrong and we could see companies that solve these problems with far less capital than we first predicted.”
Covid-19 has made it harder to secure capital for startups and the eVTOL market is no different, said Flynn. The bigger investors who usually take the lead in the segment are focusing on their core business in the wake of the pandemic. Also, very few investors are willing to venture into aviation. They may make one investment, but for the most part capital is focused elsewhere. All of which means there is simply not enough capital to fund eVTOL projects currently under development, according to Flynn.
Disruption provides greatest opportunities
Despite an uncertain economic climate, as a professional investor for over 30 years, Flynn said, from experience, these periods of disruption provide the greatest opportunities for investment. “Having already made two investments this year, I think by the end of 2020 we will probably have made two more, maybe three. Plus we have more in the pipeline, we are really busy looking at what potentially maybe really good companies for us to invest in.”
You can watch all the action from this month’s edition of Revolution.Aero Town Hall here. This session also included presentations from: Charles Armitage, European Aerospace & Defence analyst, Citigroup ; Eric Bartsch, chief operating officier and co-founder, VerdeGo Aero; Roei Ganzarski, CEO, magniX; Jeff Engler, CEO, Wright Aviation; and Sergey Kiselev, head of Europe, ZeroAvia.