EADSY - Boeing: The Uber Of The 2030s
2023-03-31 15:28:24 ET
Summary
- The eVTOL market could be as much as $9 trillion by 2050, far bigger than the size of the aircraft manufacturing market.
- The Boeing Company has differentiated its eVTOL product to such a degree that it may dominate this new industry.
- Mixed messages from Boeing have clouded our understanding of their plans in this area, so we are left to speculate on the actual strategy.
- There is the potential for Boeing to double its turnover.
In this article, I will suggest that The Boeing Company (BA) has a product in development that will be the market-leading eVTOL (electric vertical take-off and landing aircraft), and that the market for eVTOLs will be bigger than the current size of the aircraft manufacturing industry, suggesting Boeing could double its revenue.
The concept is simple; people board a small four-seat eVTOL that flies quickly between vertiports, perhaps across a city or from a large car park downtown to an airport. The market is targeted by several new entrants and the big two aircraft manufacturers.
Joby Aviation, Inc. ( JOBY ) linked eVTOL taxi services and Uber Technologies, Inc. ( UBER ) when they said they expected the price of their services to be similar to that of an UBER.
The size of the market
Morgan Stanley (MS) seems invested in the eVTOL industry; they ran an industry summit in 2022 with most industry players taking part and have been publishing a series of articles forecasting the potential for this industry. They highlight a struggle between the market potential and the regulatory problems ahead.
In recent articles, Morgan Stanley has reduced the near-term total addressable market ("TAM") by as much as 75% but increased the long-term TAM by a similarly large percentage. The 2021 update gave the following figures.
Comparison of Market Size (Morgan Stanley)
Polaris market research forecast the Aircraft manufacturing.
If these figures are close to the mark, they represent a seismic change in the transport industry. I think Boeing will be the biggest winner, and its shareholders will reap the rewards.
The competitive landscape
A host of new entrants
I track several eVTOL companies and keep a database of their performance and news updates.
The following image is output from my database; as you can see, the whole sector has performed very poorly over the last 12 months as the regulatory hurdles have come into focus. For more detail, you can read my article on JOBY , one on Vertical Aerospace ( EVTL ), one on Archer Aviation Inc. ( ACHR ) (although I have since increased my rating from sell to hold), and two on EHang Holdings Limited (EH).
All of these companies face a mammoth task. For aircraft manufacturers, they are relatively small and, apart from JOBY, have significant cash issues (data most recent quarterly report from each company).
Boeing and Airbus
The big two are heavily invested. Airbus SE (EADSF) is building its own eVTOL, and Boeing has joined and funded the private start-up Wisk Air.
The Airbus eVTOL is the third prototype they have produced. It seems inferior in terms of the spec to the competition. Its range and top speed are well below the figures for Boeing and all except the Ehang machine.
The Ehang 216 is an outlier. I covered the uses extensively in my first Ehang article, but in summary, Ehang designed their aircraft with three use cases,
- Tourism: flying two people autonomously around famous landmarks. I have seen this in operation, and it is quite a sight (I tried to bag a ride, but they would not go for it).
- Survey of bridges, buildings, towers etc.
- Emergency use: firefighting and recovery of people, used extensively during covid lockdowns.
All the other manufacturers are building air taxis, which is the market discussed by Morgan Stanley.
I see two big winners in this air taxi market, Joby and Boeing, with Boeing being the biggest winner.
Joby
Joby is ahead of the game; they were the first to get airborne, have flown the most times, and are further ahead with the regulatory progress. The initial presentation with the SEC for Joby started the UBER taxi comparisons; they bought UBER ELEVATE (p18) and received an investment from UBER in 2021 when the deal was finalized. Uber Elevate gives them the technology to run an air taxi service. Joby expects to be certified in 2025 in the U.S. and be operating in Japan with ANA that year .
On page 32 of the SEC presentation, they discuss revenue; key points are:
Revenue: $3 per seat mile for an average trip of 24 miles per trip and average occupancy of 2.3 customers. They also state that this is less than the cost of an UBER Black taxi.
Joby intends to have 850 aircraft making 35,000 flights per day. Joby is manufacturing their first company-conforming aircraft , and they have been granted the license to operate an airline.
Pilots
In my view the problem for Joby and all other eVTOL aircraft manufacturers is: where will they get the pilots needed to make 7 x 35,000 = 245,000 flights per day? All entrants, including Wisk/Boeing, mention around 30-40,000 flights per day. To reach the UBER BLACK price point, the pilots must receive the same income as an UBER driver.
Joby has partnered with CAE to provide training ( 500 hours to meet FAA guidelines ). Vertical Aerospace has also signed with CAE. Other companies are planning to recruit trained pilots. Most do not address the issue and will leave it to the operators to sort out.
Air Taxi Pilots Problems
Are enough people of the right quality to be a pilot prepared to do 500 hours of training and then be paid a taxi driver's salary? I think this is very unlikely.
Secondly, if two uber taxi drivers have a crash on Wall Street, it does not even make the local news. If two uber air taxi drivers have a mid-air collision 1,000 ft above Wall street and the aircraft with eight people on board comes down in the middle of Manhattan, it will be the main story on every news channel worldwide. The nascent industry may have difficulty dealing with what seems inevitable.
The size of the potential market, the number of flights, the number of pilots needed, and the availability of personnel to be pilots do not seem to stack up. A different approach is required if the industry is to become as big as the forecast.
Boeing, what's the plan?
Boeing invested a further $450 million in Wisk in January 2022 and now owns a majority stake, although the exact size of that majority remains undisclosed. Boeing is a key partner, not just an investor. They intend to leverage the lightweight material experience gained on Dreamliner production and help with new composite materials.
The business model Boeing is pursuing has not been made clear, they invested $450 million in January, but later that year David Calhoun ((CEO)) said at the investor day on Nov 2nd
[The UAM market] is a discreet small market that is not going to move the needle a whole bunch.
A $450 million investment in a project that will not move the needle does not seem like such a great move. Boeing killed off the idea of developing a new jet until it fixes its balance sheet (containing $40 billion of debt) and yet invested in this project, so what is the plan?
I searched through the Boeing annual statement released in January 2023 and could find no mention of Wisk.
We will have to speculate, I think there are three possibilities.
- Boeing intends to develop an air taxi service under the Wisk brand.
- Boeing intends to manufacture Wisk aircraft and sell them through its usual channel.
- It is all a distraction, and Boeing wants to develop autonomous tech for a future Boeing aircraft.
Airbus is pursuing the second option, building an eVTOL and selling it through the usual channel. I think Boeing is pursuing option 1 and holding option 3 as a backup plan.
Autonomous Air Taxis
Along with Ehang, Wisk has been pursuing fully autonomous aircraft from the outset. The latest aircraft has room for four passengers and carry-on luggage. It is known as version 6.
Wisk became a joint venture between Boeing and Kitty Hawk Corporation in 2019. The company began in 2010 as a team dedicated to eVTOL development. Kitty Hawk Corporation was started by Google's co-founder Larry Page initially as Zee.Aero, in 2020 he announced that Kitty Hawk would wind down operations to concentrate on the Wisk joint venture with Boeing. Kitty Hawk had been developing a single-seat eVTOL, but that project is now shelved.
I believe that Boeing intends to leapfrog Joby and Archer (both due to launch piloted eVTOL in the US in 2025) with an autonomous eVTOL launching in 2028. Boeing published a white paper called "The concept of Operations for Uncrewed Urban Air Mobility." The document is 64 pages long and well worth reading to understand Boeing's plans better, but here are some key points.
Page 12
Operations will be safe and affordable and fly day and night in all conditions.
Page 14
The aircraft will be uncrewed but managed by a Multi Aircraft Supervisor, known as an ((MSV)). The MSV will not be a remote pilot. All piloting functions will be automated and onboard. MSVs will be able to override the autonomous behavior and will supervise multiple vehicles at any one time.
Page 16
Aircraft will take off and land from a vertiport, and a vertiport manager will ensure safe operations on at the vertiport but will not be involved with air traffic control.
Page 17
The near-term, mid-term, and long-term state of operations is detailed, starting with low-altitude visual line-of-sight routes and moving onto fully autonomous longer-distance routes.
The concept is summarized in this image from page 9.
The aircraft flies on pre-determined routes between the vertiports in a city connecting key transport hubs with high-density parts of a city, all controlled by a flight operations center.
A second white paper published by Wisk in 2022 talks about the SCOPE platform, an urban simulation software package to help design and optimize an air taxi service for each metropolitan area. It contains some quotes suggesting that Boeing and Wisk intend to be operators, not manufacturers.
At Wisk, our primary AAM use case is passenger transport through a multimodal air taxi service
At Wisk, we believe we will be the first major AAM company to certify and fly a fully autonomous eVTOL air taxi in the United States.
It is not definitive proof, but I believe Boeing intends Wisk to be an air Taxi company.
Airbus
Airbus started later than Wisk, but they expect certification to arrive earlier because they intend to have a piloted aircraft. The City Airbus is due for certification in 2026, giving Airbus a 2-year head start. The plane has a much smaller range and is slower than the Wisk version. Airbus is not planning to be an operator and expects the first use case for its eVTOL to be in emergency services. However, the power of an eVTOL will mean it cannot replace traditional helicopters in this area. The Nextgen will be the third generation of the Airbus eVTOL. However, it is not due to take to the skies until 2024, and the demonstration vehicle is still being assembled.
Conclusion
The Boeing Company will not be the first eVTOL in the skies above America, that will probably be JOBY, but it will be the first autonomous one.
The Wisk aircraft seems to have a better specifications than the Airbus Nextgen, which will be piloted like all other competitors.
The market looks enormous for this technology, and the number of available pilots could be the limiting factor for this technology's forecast exponential growth and take up.
Boeing and its partner Wisk are developing an autonomous ecosystem that may give it a significant competitive advantage over all of the competition.
Regulatory approval for an autonomous aircraft will be a complex task that only Boeing and Airbus have the funds and knowledge to attempt. However, only Boeing is currently taking this path.
It is a little like the 787 v A380, when Boeing and Airbus took different paths to replace the aging Jumbo fleet. Boeing and the Dreamliner were clear winners in that battle, and I think the dice is loaded in favor of Boeing in the coming eVTOL war.
If The Boeing Company is going to develop Wisk into an autonomous air taxi company, and if they can get approval and if people will use the service, it has the potential to double the size of Boeing.
Or is that just too many if's?
For further details see:
Boeing: The Uber Of The 2030s