Emerging markets to lead the way into electric flight.


With now more than 200 electric and hybrid-electric vertical takeoff and landing (eVTOL) concepts currently in development around the world, public attention has shifted from the feasibility of the eVTOL concept to its future certification, testing, and application in real life. Often referred to as “passenger drones”, eVTOL vehicles are considered “disruptive” as their attractive operating cost, high safety standards, and eco-friendly approach are meant to revolutionize flying. Accordingly, they are of interest to a number of sectors, of which passenger transportation — or aerial mobility — constitutes the most anticipated launch: the one meant to bring private aviation even closer to the end-user.

***Editor's Note: This guest post is authored by Paul Malicki, CEO of Flapper.

What is Aerial Mobility Anyway?

Remember The Jetsons? Produced first in the early 1960s, the cartoon series envisioned a fairly advanced version of what we would refer to as “the aerial mobility system”. The Jetsons’ semi-autonomous air pad (sitting four, plus a dog) could take off from hundreds of vertiports and loop through specially designed aerial traffic corridors, most likely overseen by the numerous command centers which appeared in the series. If all those terms sound complicated, consider that The Jetsons was set exactly 100 years into the future, which corresponds to the year 2062 — within the lifetime of myself among other millennials.

Rewind back to 2019 and Jetsons-like airborne automobiles and highways have yet to formally launch. Yet, with numerous certifications on the way, we can surely state that flying passenger drones, as we’ve envisioned them, have never been closer to reality.

“Aerial ridesharing”, “aerial urban mobility”, or “on-demand aerial transport” all refer to the next generation of air transportation, which will lay the foundation for faster, more sustainable, and safer travel. Usually considered for urban commutes, aerial mobility might also be important for city-to-city transportation, with larger and more powerful vehicles operating flights with up to 2h in duration.

The enabler that drives the emergence of aerial mobility is eVTOL technology, which promises to solve the following key issues presented by alternative modes of transport:

Operating Costs

In the near-term, electric passenger drones are meant to bring down the Operating Cost per Seat-Mile to less than US$2. Long-term prospects point to a potential reduction to a level of $0.44 per seat, according to Uber Air. Hydrogen-powered systems are even more promising. Boston-based Alakai estimates the Operating Cost per Seat-Mile to be between $0.14 for a fully-autonomous system and $0.29 for piloted aircraft. That compares to the average of $0.5-0.6 for car ownership and $0.5-$2 for ridesharing trips.

Infrastructure Costs

The redundant air space constitutes the most affordable venue for the construction of future air corridors. According to Airbus, aerial urban mobility is cheaper to build than highways, train networks, metro, and hyperloops — the last one considered the most challenging from a cost perspective.

Safety

To succeed, eVTOL operations will have to be much safer than both helicopters and cars are today. According to one research paper (PDF), the level of safety of passenger drones will be 2x higher than that of helicopters. Additional rotors, new-generation engines, advanced command center control, and pre-established air corridors are all likely to add an extra layer of safety to eVTOL operations.

Noise

As one ex-NASA employee I once interviewed said, “The problem with eVTOL is not the level of the noise per se, it’s the type of noise it creates”. Projected to be 4x quieter than helicopters, passenger drones will generate a mosquito-esque noise, which some might find disturbing. Capitalizing on their experience in noise reduction, companies such as Airbus, Embraer, or Bell are likely to gradually switch to drones with lower rotor tip speed and extra rotors for quieter air mobility.

The eVTOL-powered flights are hence central to the very concept of aerial mobility. Yet, it’s the complexity of the entire ecosystem, including air space design, vertiport infrastructure, charging infrastructure, and traffic control that makes the future implementation of passenger drones more challenging.

A simplified version of an eVTOL ecosystem in São Paulo looks as follows. In it, the drones take off from airport-like helicities, equipped with high-speed charging stations. The passenger service is realized in specially adapted vertiports. The dedicated traffic control towers overlook both helicopter — and eVTOL traffic — the latter initially allowed exclusively at predefined routes only. An early-stage route built upon the Tiete River constitutes one such possibility.

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Source: Flapper [2019]

You’ll quickly note that the map resembles any other urban mobility system. In fact, the current boom in on-demand urban mobility (the so-called “e-hailing”) is another factor that influences advancements in the eVTOL space. Let’s take a look at the driving forces behind this sector, with a special focus on emerging markets.

The New Driving Forces in Mobility

Starting in 2013, I was responsible for marketing and strategic alliances at Easy Taxi, back then considered the world’s largest taxi app. Rocket Internet, which backed the company, made us focus heavily on emerging markets, from Bolivia to Indonesia. Headquartered conveniently in the Brazilian city of São Paulo, and fuelled by the demand from underserved markets in Latin America and Asia, Easy — as we later renamed it — generated millions of taxi rides. We were experiencing first hand the impact we were leaving on the region’s metro areas.

Fast-forward to 2016 and the markets showed first signs of maturity. The local taxi app 99 joined Didi and became Brazil’s first unicorn, while Cabify acquired my former company. Around that time, Uber ran a short trial of UberCopter in São Paulo, which preceded the launch of the electric scooter revolution.

As Didi became a dominant player in China, another e-hailing juggernaut — Ola nearly monopolized the market in India. By 2016, Malaysia-founded Grab had already become omnipresent in every large city in Southeast Asia. In Russia and CIS, Yandex merged with Uber while Careem joined the latter in the Middle East. A super-app Snap started in Tehran, while other (mostly emerging) markets welcomed Bolt, Estonia’s newest billion-dollar tech company.

The magnitude of these deals was unprecedented in the history of Venture Capital. For the first time, the eyes of investors were drawn to frontier cities — large metropolitan areas located within the boundaries of emerging markets — and the crucial role that technology was playing in their evolution. In fact, until today, the world’s largest e-hailing markets lie within these metropolitan areas. To put it in perspective, Tehran-based Snap does more than 50 million orders a month (including food and delivery). That’s more than what Uber, Lyft, and Juno generate altogether in New York. Today, Uber’s six out of ten largest top markets (cities) are located in Latin America, not the US, and the list includes São Paulo, Mexico City, Rio de Janeiro, Bogota, Lima, and Belo Horizonte. Asia leads the statistics in terms of the overall volume of monthly orders (Table 1).

Today, we can say that there were at least three integral groups of factors that drove the adoption of on-demand mobility in the early 2010s, a trend that continues until present:

Structural factors

This includes high levels of urbanization, a consumption-focused demographic structure, easy access to a cheap workforce, a lack of public transport infrastructure, and safety risks.

Technology

Previously unavailable to the masses, technologies such as smartphones, 4G Internet, live-streamed GPS maps, and online payments all revolutionized the consumption of every-day services.

Government support

Despite popular belief, emerging markets tend to be early-adopters of new urban-mobility focused policies. São Paulo first gave ground for private car e-hailing to operate freely in 2015. The same year, Uber and Grab were homologated in Manila. China joined in July 2016. The service continues to be unavailable in numerous Western democracies, including Germany and Denmark.

It is without a doubt that high levels of urban concentration drove the adoption of e-hailing and on-demand consumption models. I argue that it might be the single most relevant driving force behind the future expansion of new mobility models too. Consider the following logic: (1) The concentration of urban structures in developing markets has grown dramatically in the last three decades; (2) Data from such markets show that a more concentrated urban structure is best for economic growth; 1 and (3) The construction of new metro lines, including “sky metro” systems, comes at horrendous costs and often involves geological-, political-, and environmental factors.

Table 1. The comparison of the world’s largest cities for on-demand urban mobility and their corresponding providers

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Sources: * Yandex. Taxi website and The Moscow Time, assuming 53% growth YoY, ** Interview with ex-Uber employees. What’s known is that São Paulo is the company’s largest city and that it does around 100M monthly rides. **** Interviews with ex-employees. Based on the latest data, where Didi claimed it does 20 million rides a day in China only. ***** The number of monthly orders comes from Grab’s interview for Fortune. Data for Manila – estimates (Grab claims Indonesia is it’s largest market). ****** Based on the data where 80% of Ola’s business comes from large cities (interview for Hindustan Times, 2017), where I assumed that Bangalore alone is responsible for 15%, as per ex-employees. The official number of rides per day is 3.5 million.

Lobbying for the construction of city transportation systems makes zero consideration for more futuristic models. This despite the fact that we do have a preliminary infrastructure in place which, with a fraction of the costs used to build a metro system could easily be transformed into a new eVTOL ecosystem. Consider the following ranking of the cities with the highest number of high-rise buildings:

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Source: Emporis. Buildings only. Points per Building

12 - 19 Floors = 1 Point 20 - 29 Floors = 5 Points

30 - 39 Floors = 25 Points 40 - 49 Floors = 50 Points

50 - 59 Floors = 100 Points 60 - 69 Floors = 200 Points

70 - 79 Floors = 300 Points 80 - 89 Floors = 400 Points

90 - 99 Floors = 500 Points 100 or more Floors = 600 Points

1 Frick, S. Rodríguez-Pose, A. Urban concentration and economic growth. [2018]

Have you noticed one common thing for the top 20 cities on the list? Many of them appeared on my previous ranking of urban mobility — that’s true — but even more relevant is the political spectrum behind the frontier cities. Fifteen out of twenty cities with the most high-rise buildings are governed by what the West refers to as flawed democracies and autocracies, the top-down like polities where party chiefs, sheiks and royal families dictate multiple aspects of everyday life of society. History has proved that under such political regimes, strategic projects, especially those related to infrastructure (think: airport and connectivity) and energy security, can often “fastpass” complex approval processes and be realized much more quickly than in the West. Henceforth will the next wave of aerial mobility originate in Dubai or Shenzhen? This largely depends on demand and such projects’ ability to solve real-life problems of cities.

Who are (the Future) Customers of Passenger Drones

Each May I fly to Geneva, Switzerland to participate in EBACE, Europe’s flagship business aviation event. This year, I couldn't shake the feeling that EBACE was not a mere private aviation event anymore. EVTOL and green fuels dominated the forum’s discussions. Most notably, one of the panels composed of the charter industry experts concluded obstinately that the electric airplanes of the future might not fall under the auspices of business aviation anymore… Are we on the verge of a cultural evolution? And why would the industry’s giants, such as NetJets or VistaJet skip out on the opportunity to enter the passenger drone society?

The case for eVTOL being closer to urban mobility than city-to-city transportation has been there for a while. Even the aviation behemoth Airbus has recently confirmed in my latest interview that when it comes to eVTOL, aerial mobility constitutes a bigger opportunity than boutique private airlines. And don’t get me wrong — it’s not (just) about the size of the market. The entire (global) e-hailing sector is currently worth slightly more than USD 60 billion. That compares to USD 24.7 billion for business jets (est. USD 40 billion globally) and some USD 200 billion for commercial aircraft, not including the passenger market. The reason stems from the future profile of the passenger drone clientele.

Most of the eVTOL-related investor decks I reviewed estimate their future demand based on the following assumptions: (1) We are competitors to jets and helicopters; hence (2) Here are the projections for both sectors and how we’re going to grow in parallel with them. Unfortunately, such assumptions are wrong, to say the least. Let’s first agree that passenger drones resemble helicopters more than airplanes. Are you with me? Let’s now analyze the use cases that currently exist in the helicopter sector and how the eVTOL concept can potentially be applied to each of them:

Table 2. Helicopter use cases vs Passenger drones.

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Sources: Own estimates. Refers to manned vehicles only, hence there is a lack of data for cargo operations, among others.

The above list, although subjective in nature, sheds light on the very features of the future use of eVTOL:

Up to 80% of the demand for passenger drones will originate from aerial urban mobility. eVTOL is highly unlikely to replace helicopters – not even in the long-term.

If you still doubt that urban/aerial mobility is the main use case for eVTOL, check the fact sheets of the passenger drone projects currently in planning. Not surprisingly – and similar to the electric car sector – batteries constitute the main performance challenge. Most of the early-stage eVTOL projects that have already been tested, including eHang and Volocopter, possess the range of (only) 20-40 miles. The more ambitious passenger drone projects zero in on between 186 miles (for Lilium) to 400 miles (for Skai), yet none of them has so far validated such assumptions.

Fig. eVTOL use cases in passenger transportation
 

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Accordingly, and with a high level of certainty, we can assume that the passenger drones will be the first to serve urban communities. Porsche Consulting, the arm of the Stuttgart-based German sports car manufacturer, estimates that 65% of the future eVTOL fleet in a city of the size of São Paulo will be devoted to replacing cars. The research further estimates that the volume needed for on-demand vertical flights — the service currently realized by helicopters — will be up to 6x smaller.

Certified aircraft charter operators will likely be the first to overlook eVTOL flights in the years to come. My final comment in this regard refers to the split between the private vs public use of passenger drones. Most of the companies we collaborate with made it crystal clear that they don’t want their vehicles to end up in the hands of private owners BEFORE specialized operators test them out thoroughly. This phase might take years, and the argument is wholly based on security (and thus, PR). Would you risk letting your just-launched drone fall down due to unprofessional use by the would-be airplane pilot? Likely not. We have yet to discover whether the same Part 135-certified aircraft operators that today run charter services will be behind the future operations of eVTOLs, but rigid certification will surely be in place. Such services will require adequate infrastructure, experienced flight coordinators, and an understanding of meteorological factors.

Which Emerging Markets will Lead the Next Wave of Aerial Mobility

In August 2019, China-based EHang became the first eVTOL company to obtain a category-specific safety certificate, allowing it to continue tests ahead of the official launch of its EHang 216 vehicle. A number of destinations are fighting for EHang’s attention, including Dubai and Las Vegas. Interestingly enough, its chassis technology production is now outsourced to the West, with a dedicated factory in Austria. Yet it was the Chinese government that took the first step in officially certifying the project and allowing it to take off. Will other emerging markets follow suit?

Looking at public tolerance to future eVTOL traffic, Latin America might gain an edge over its Asian counterparts. Airbus-produced research pointed to a more than 67% acceptance level towards Urban Air Mobility (UAM) in Mexico, vs just over 32% in New Zealand and 46% in Los Angeles. The city of Ciudad de Mexico already runs Airbus’ aerial mobility project, with pay-per-seat flights connecting Mexico Airport with the city’s business center.

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Source: Airbus. Based on the survey among 1,540 respondents [2019]

Brazil, most notably São Paulo, constitutes another likely candidate. The country’s largest city already leads the global rankings for helicopter traffic and use. São Paulo has appropriate infrastructure and high levels of public acceptance, as well as an existing culture of using both private aviation and on-demand apps. It is famously the only place in the world with a dedicated helicopter control tower. The numbers speak for themselves. The city is home to more than 600 helicopters and 200 helipads, of which at least 20 are used on a daily basis by companies such as Flapper. Compare this to San Francisco, where there is just one active helipad – already accompanied by a website to shut it down – and you’ll know where I am coming from.

Table 3. The Helicopter Fleet Size by City.

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Sources: ABRAPHE [2016].

It was here in Brazil’s Southeast that in the early 2000s Embraer began its revolutionary very light jet (VLJ) project, Phenom 100. It took Embraer just over 3 years to develop and launch Phenom, a record that remains unbroken until the present. Today, the company is at the forefront of the battle for passenger drones and has already presented the first project specifics.

The next wave of urban mobility will come from frontier cities, the ones with heavy traffic, appropriate high-rise infrastructure, and high levels of public acceptance.


Is there more to it? Numerous international locations, from Dubai to Mumbai are preparing for the launch of their own local UAM projects. As long as structural factors are favorable and government approvals run smoothly, we’re likely to see more and more frontier cities adopting urban mobility projects in the next 5 to 10 years.

On a Final Note

Among the more than 170 urban air mobility projects analyzed by Roland Berger, 72 are made in Europe and 77 in North America. Volume-wise, only a fraction of the most ambitious eVTOLs are being produced in Asia and Latin America — the regions of which we spoke extensively above. Doesn’t that go against my argument of emerging markets being an attractive target for passenger drones?

The answer is no — quite the contrary, high-tech nations, such as Germany, the US, or Japan should (and likely will) lead the game for the development of eVTOL technology in the years to come, while using frontier cities as their launch markets. Their access to capital and extremely qualified labor with experience in aerospace constitute entry barriers too high to overcome for the emerging countries.

Aerospace traditions are another factor, with Russia currently responsible for more eVTOL projects than Japan, despite the latter having better to more capital (financial or human). The market has already proved that the most serious projects require close government collaboration and that projects started in the frontier cities are here to stay. And whether you are a business person looking to invest in a futuristic eVTOL project, or a potential contributor, you shall see this as an opportunity to bridge the gap between the developed and the developing world. A beautiful, $2.9 trillion global eVTOL market awaits.

About the Author

Paul Malicki is the CEO of Brazil’s first boutique private airline, Flapper, which offers short-haul flights in the Southeast of the country. Previously with three unicorns: Nubank, Farfetch and Easy Taxi (Cabify). I once wrote a book entitled “The Chief Mobile Officer”. Honoree of the 2017 Forbes U30 list.