US air taxi companies keep burning significant cash as they drive toward commercialisation of their respective electric vertical take-off and landing (eVTOL) aircraft.
Santa Clara-based Archer Aviation reports spending $142 million during the first quarter for a net loss of $117 million, as the company has yet to fly passengers or deliver its Midnight aircraft to customers.
But it is making up-front investments it believes will pay off in the future. Namely, Archer is assembling six Midnight prototypes that will be used in flight testing for certification with the Federal Aviation Administration and making supply chain investments to support future production.
”We continue to experience negative cash flows from operations as we are still working to design, develop, certify and bring up manufacturing of our eVTOL aircraft and thus have not generated any revenues from either of our planned lines of business,” the start-up discloses in a 9 May financial filing.
High spending on research and development is to be expected from start-ups that have yet to launch revenue-generating services with a new class of aircraft – none of which have cleared certification with the FAA. But cash burn is one metric that analysts use when appraising the relative health of publicly traded companies such as Archer, fellow California start-up Joby Aviation and South Florida’s Eve Air Mobility.
“In Joby’s case, one of the reasons we like them is because they have the strongest balance sheet in the industry,” Andres Sheppard, a senior equity analyst at Wall Street firm Cantor Fitzgerald, told FlightGlobal last month. “They have the highest cash burn in the industry but they have the highest cash balance.”
Santa Cruz-based Joby reported this week spending some $146 million during the first quarter to support certification efforts and “manufacturing prototype aircraft, parts and test articles”. Those expenses were offset by $51 million in interest and other income.
The company reports holding $924 million in cash and short-term investments at the end of the first quarter, down from a little more than $1 billion at the same time last year.
Embraer-backed Eve reports a $33.9 million loss from operations, including spending $27.5 million on research and development, during the first quarter. The company is currently assembling its first full-scale prototype at a production facility in Brazil.
Eve notes that research and development costs increased roughly $6 million over the same period of last year, ”primarily due to an increase in R&D’s team headcount, higher engineering expenses… and higher expenses related to cost of supplies for the development of the prototype vehicle”.
The nonconforming prototype includes ”batteries, motors, thermal management systems, propellers and other components” that will be used in later variants.
Eve’s development costs include those related to shoring up its supply chain. ”Additional milestone payments and purchases of parts, equipment and supplies went to suppliers and outside contractors in connection with the continued development of the prototype vehicle,” the start-up says.
Meanwhile, Archer is moving forward on a “high-scale automated battery pack manufacturing line”, chief executive Adam Goldstein said during the company’s 9 May earnings briefing.
“This line is capable of producing enough battery packs to support our planned production plant in Georgia,” he says. ”I am confident that we are leading the way in the industry with this capability and that our investment there will pay off for years to come.”
Based at Archer’s facilities in San Jose, California, the manufacturing line will be capable of producing some 15,000 battery packs annually.
The start-up has made such investments across its supply chain, Goldstein adds, having spent more than $50 million with suppliers to support future aircraft manufacturing. “As these capital expenditures and upfront non-recurring costs roll off, I expect we will naturally reduce our [cash] burn… as we shift into preparing for commercial launch heading into next year.”
As of 31 March, Archer held $406 million of cash and equivalents, a decrease from $450 million it held on the same date of 2023. As the company’s largest shareholder, Goldstein says he is aware of potential dilution of Archer’s share value as the company balances its desire to grow quickly. He maintains that Archer is “massively undervalued relative to the proprietary step changing technology we are creating”, adding that it is seeking to raise more capital in the lead-up to launching passenger flights.
Archer and Joby are both exploring the possibility of launching operations in the Middle East after achieving FAA certification.
Story corrected on 17 June 2024 to note Joby had $924 million in cash and short-term investments at the end of the first quarter, not the third.
