HI/VTOL Investor Opinion: UAM and the ‘Second Mouse Strategy’


Urban Air Mobility is awash with passion, innovation and, for the moment at least, not a little cash. But, when it comes to investment in the sector, it may pay to adopt the “Second Mouse Strategy”*, as delegates heard at this week RevolutionAero Town Hall online meeting.

The optimism among speakers – representing Up Partners, Uber, CitiGroup, DiamondStream Partners and BAE Systems – was palpable. Contrary to some predictions, Covid-19 may reinforce the case for UAM rather than undermine it.

True, the sector will be affected by the global pandemic, as people choose to live in rural or suburban areas – but there may be upsides.

Wyatt Smith, head of business development, Uber, reasoned that cities would continue to be a bigger part of global commerce. “Certainly, people are rethinking where they choose to live and work, but the resilience you will see in the growth of cities as a broader macrotrend towards urbanisation will continue,” said Smith.

Last week alone, Cyrus Sigari, co-founder, Up Partners spoke to 40 start-ups in and around the autonomous mobility space. Although only some will cross the finishing line – BAE’s Bill Schuhle says 10 out of the 170 – Covid-19 is proving to be a push in a positive direction.

DiamondStream Partners’ MD, Dean Donovan, believed that changing commuting patterns would see UAM possibly merging with regional aviation – such as hybrid electric carriers.

This was backed up by CitiGroup’s European Aerospace & Defense Analyst, Pavan Daswani, who touched upon the latent demand that industry operators will find. With an increasing number of people likely to want a 15-minute air taxi ride as opposed to a two-hour train journey, from home to work.

Cost per seat mile

A big factor in making the UAM model accessible to larger numbers will be the cost per seat mile, which is usually found by dividing operating costs by available seat mile (or range). Currently, Uber’s Elevate programme – which Smith said is still on track for a late 2023 launch – will offer prices similar to its Black service.

Smith added: “$6 a seat mile is where we see things starting and through time, closer to 2030, you can begin to provide costs which are much more competitive.

Donovan agreed with this, stating that cost per seat mile has been one of the key drivers of growth in commercial aviation over the past 50 years.

According to Daswani, while most companies are targeting $2-$6 per seat mile – for manned vehicles – autonomous systems will be the key unlocking competitive lower prices. And Sigari said: “Ideally, you’re not flying it. It’s flying you.”

Investing in the aviation value chain

Donovan says he would invest in propulsion companies, because he thinks it is going to make the cost reductions necessary for this branch of aviation to take off.

They’re going to play a much more important role in the aviation value chain than the turbofan suppliers today. Carriers will need propulsion systems to meet strict regulatory requirements around carbon, noise and fuel efficiency,” he said.

Daswani warmed to a similar theme: advocating investment in those enabling the technology rather than the airframe manufacturers themselves. “It might be a case of the second mouse* gets the cheese rather than early bird catches the worm.” Drawing on one more memorable metaphor, he said: “As far as picking a winner, I would pick a company that’s selling shovels rather digging for gold.

So, if you have investment dollars looking for a home in UAM, it could pay to adopt the Second Mouse Strategy.

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