‘Innovation and a Leap of Faith’

Robert W. Moorman interviewed Robin Riedel, Partner and Global Co-Leader of McKinsey and Company’s Disruptive Aerospace unit.

CAT: I have a quote from your December 2022 report and a revenue projection for the AAM / eVTOL sector. AAM is expected to “take off in the second half of this decade,” wrote Robin Riedel. Riedel said that investment in the AAM start-ups exceeded $15 billion through the first 10 months of 2022. Is there an update to this information?

Riedel: The total right now, from 2021-March 2023 is $17.4 billion in disclosed funding. It includes eVTOL aircraft, airframes and some of the powertrains.

CAT: As of January 2023, there were over 760 different eVTOL concepts from more than 350 companies, according to the Vertical Flight Society. Some in my trade believe there will be a whittling down of eVTOL and eCTOL competitors in this not fully defined market. What is your view of this sector?

Riedel: There are only 9 [eVTOL] companies that have been funded with over $500 million, [according to McKinsey’s data base]. There are less than 100 companies that have been financed with over $5 million.

Is it overcrowded? I think the industry is taking a portfolio approach. With traditional large [commercial] aircraft, it is a 10-year, $10-billion project. In eVTOL, we’re seeing funding for about a dozen different concepts that are very different and take a lot of innovation and a leap of faith into new technology. These investments will accelerate innovation, but there will be failures along the way.

We are getting away from envisioning the future to actually building it. People are building prototypes and thinking through what the operational economics look like.

We are now in the stage where we actually roll up our sleeves and do something.

CAT: It appears that the major OEMs - Boeing, Airbus, Embraer - are taking a measured approach to the evolving eVTOL business. Do you agree?

Riedel: I wouldn’t phrase it that way. Embraer is all in with Eve as Boeing is with Wisk. Airbus has been a bit more measured, but has made claims about what they want to do with CityAirbus.

You could argue why aren’t they pushing the timeline like others do. And they (the established OEMs) might say that it is going to take a little longer. Which makes sense. All are invested in this space.

CAT: Airlines have placed soft orders on eVTOL aircraft. Are these hedge bets?

Riedel: Placing soft orders comes at a limited risk. No real major financial commitment. There are 8,821 orders for eVTOL as of end of February 2023. It is worth $27.9 billion.

Also there is uncertainty around performance capabilities and economics of the eVTOL aircraft.

CAT: Boeing and Wisk’s full autonomous aircraft. Viable?

Riedel: I think we will get to uncrewed aviation because autonomous is a bit of a misnomer. Humans will be in the loop for a long time. Seeing with cargo and drone delivery and eventually with passenger aircraft. It’s a big step to take the human out of the cockpit.

CAT: Some express concern about the range, speed and market for electric jets. What is your view of the Lilium Jet and the battery and propeller-driven electric Eviation Alice?

Riedel: Can’t talk about individual players. Lots of configurations could work. There is a bit of experimentation going on. The one challenge is the range limitations because of the batteries. Battery electric [powered] aircraft will be used for short flights. Anything over 500 miles is not realistic in the next 10 years.

CAT: Is there anything you think is key to the eVTOL / eCTOL sector

Riedel: There is an interesting question here on the value chain. Who is going to do what? New players will emerge that specialize and incumbents take over pieces.