What a start to the year. In less than two months, 171 special purpose acquisition companies have gone public in offerings that have raised $53.3 billion. That’s three times the number and over 2.5 times the value of the traditional IPO market. Even celebrities like Shaquille O’Neal, Paul Ryan and Alex Rodriguez have gotten into the act.

Archer Aviation air taxi

An artist’s illustration of Archer Aviation’s electric air taxi design. | COURTESY OF ARCHER AVIATION

SPACs have become popular in part due to the growing interest in private equity and venture capital and in part because they can market themselves based on forward-looking statements. Typically, IPOs are excluded from utilizing “safe harbor” protections.  Without these protections, a typical IPO prospectus will only include historical financials. SPACs, as a merger rather than an IPO, can talk about and make financial projections about the future. This makes them attractive vehicles for venture type investments, where most of the value of the company depends not on what it has today, but what it will create in the days to come. (The following links explain SPAC mechanics and answer FAQs.)

The SPAC trend has changed the capital outlook for aviation and aerospace by potentially injecting billions of dollars into the ecosystem this year alone, with dramatic consequences. 

In addition, New Vista Acquisition, Zanite Acquisition and Genesis Park Acquisition will all likely invest in the mobility space. eVTOL.COM reports that close to $2 billion in committed SPAC funds are looking for electric vertical take-off and landing (eVTOL) and urban air mobility (UAM) deals and that amount could be multiplied by additional private investment in public equity (PIPE) funding.

Of the six announced and rumored deals, three involve UAM companies, the Wheels Up deal targets private aviation, and the rumored Surf and Lilium deals target the regional air mobility market.

The market opportunity looks massive, although heavily weighted towards premium services. Investors have bet on several business models with, in some cases, contradictory premises to address the opportunities.

Not surprisingly, most of these deals look like venture investments. Only one of these companies has received funding beyond Series C, few are profitable, and several have no meaningful commercial revenues. Almost by definition, not all of them can succeed — expect unicorns and spectacular failures.

The details around the business plans still need development in some cases, huge opportunities remain unaddressed, and a number of important questions remain to be answered. Here’s what could become of the advanced aerial mobility sector as it gets SPAC’d.

SPACs are Bets on Advanced Aerial Mobility Themes 

While the markets remain fluid, all of the deals announced so far move the world toward a more integrated mobility system where there will be aerial options for the last miles of travel, substitutes air travel for ground travel, and ultimately saves customers time and money. Together they will accomplish far more for the industry than any individual piece. The key themes include:

Private aviation as a substitute for premium commercial aviation. Why not dispense with commercial and urban air travel completely? Wheels Up targets replacing autos in the last mile for premium traffic as part of a larger luxury play. Wheels Up enables travelers to fly from General Aviation airports closer to home and to airports closer to the travelers destination. In addition, these airports typically don’t suffer from the congestion and lengthy security checks of the commercial airports. This reduces time in the car and reduces overall trip time. Wheels Up banks on growing this market dramatically via its commercial aviation connection with Delta Airlines. (Wheels Up recently acquired Delta Private Jets from Delta in return for equity.) It will also save time vs. Archer’s implicit UAM connection strategy with United (see below). However, this all comes at significantly higher cost even for premium business passengers and probably remains out of reach for nearly all commercial aviation passengers. As a result, this luxury segment will remain a relatively small subset of aerial mobility.

The SPAC should give Wheels Up the capital to sustain the marketing campaigns (and ongoing losses) that convert affluent customers from commercial to private aviation. In addition, it will support the massive technology investments needed to create a marketplace that will lower costs for charter services based on higher asset utilization.

UAM to replace last-mile car trips for business travel. United Airlines and its regional partner Mesa Airlines have made a big bet on UAM via the Archer deal. Not only is United investing in Archer, it also placed an order for $1 billion worth of Archer’s aircraft. Connecting commercial aviation flights to a UAM network should feel natural to a company like United that already has an extensive connecting network. The expanded network would lead to a more integrated product that takes people all the way from downtown to downtown, or new regional connection products that tie commercial airports to smaller GA airports nearer to people’s homes. In essence, it is a bet on replacing most of the last mile car trip with an air trip. These products will see the most penetration in premium business segments that can afford the high prices that UAM operations will require to be profitable. United, with its strong position in business travel, is in a good position to pursue these products. In terms of risk, the operating costs of UAM aircraft will start with a relatively limited market until autonomous operations become certified in the late 2020s or in the 2030s. Even with autonomy, these aircraft will remain a more expensive form of transportation than an automobile. In addition, the commercial airport to GA airport connectivity use case remains suspect. Existing light aircraft today or new hybrid electric aircraft under development could fulfill this mission at lower cost than UAM vehicles.

Archer’s SPAC should create the confidence that enables airline partners to invest in creating demand flow from commercial aviation to UAM. For example, United will need to invest behind educating customers, developing software to facilitate UAM bookings as an integral part of commercial aviation trips, and limiting UAM connections times at major airports by making appropriate terminal investments. The result should pave the way for other similar deals and ultimately a more integrated transportation system to help premium passengers arrive at the last mile.

UAM as a travel service with proprietary infrastructure. Blade’s model looks closest to what Uber did in the ride-sharing market. Blade contracts capacity from operators, while focusing on the booking and ground experience. The high initial cost of UAM service, the initially limited landing locations outside airports, and the large number of UAM airframe programs underway have led them to plan on an eVTOL market that will start off demand constrained rather than supply constrained. By staying asset light as electric aircraft are certified, Blade will put itself in the best position to develop demand early and then contract capacity in a competitive market. Staying out of operations also limits sensitivity to demand shocks, which is always a challenge in aviation, reduces operational complexity, and eliminates the company’s direct exposure to unionization.

Blade’s model also puts management focus and capital investment on the parts of the business that can generate the most margin. Proprietary terminal or landing locations in an infrastructure limited environment should give Blade pricing power and first mover advantages. History has shown that control of key infrastructure assets, see Heathrow for British Airways or Hartsfield for Delta Airlines, can limit competition and thereby form the basis for a highly profitable operation. By starting with helicopters, Blade can credibly cut these deals well in advance of UAM airframe suppliers who intend to start vertically integrated operations. Given the potential demand for the most attractive locations and the complexity of developing supply, infrastructure could provide even greater advantages in UAM than in commercial aviation. In addition, booking process, ground experience, and multi-modal integrations all matter relatively more in a business with 20-30 minute flights than in commercial aviation. In commercial aviation, customers demonstrate far more price sensitivity to fares than ancillaries, and Blade’s strategy sets it up well to capitalize on services that go with the flight.

Blade’s SPAC should enable it to stimulate demand for UAM services prior to the certification of the first eVTOL UAM aircraft. This will demonstrate proven demand for UAM aircraft as these new airframers look for funding thereby making capital easier to raise. Its investments in infrastructure will provide a scalable path to accommodate new passengers as the new aircraft push down costs.


Military contracts and ride sharing as a path to UAM scale. Joby has taken almost the opposite macro view to Blade. Its plan uses large-scale government contracts to build revenue prior to commercial certification with $40M in contracts signed and another $120M in process. The government bridge makes sense given the time it will take not only to certify, but also to create operating models that drive down cost/seat mile, build out appropriate infrastructure, and refine the aircraft. The commercial plan rests on ride-sharing, probably building on the thought leadership the Uber Elevate team brought after its own merger, and is based on a fundamentally different assumption regarding supply and demand balance than Blade. Joby believes the market will be constrained by aircraft supply instead of demand. Given the capital required to make Joby’s strategy work, this represents the biggest bet in aviation since the 787 program.

Joby partially addresses this type of rapid market penetration in its investor presentation. It points to the low energy cost for Joby’s aircraft and its attractive economics vs. helicopters. It also highlights the Uber Elevate work on route construction in various markets.  However, it does not fully address how effectively the company can compete for auto trips. Relative energy consumption is interesting, but doesn’t actually reflect cost of operation. A four-passenger aircraft costs a lot more than a car, and individuals who own automobiles will have a different attitude to return on their assets than financial investors will expect from an airline. In addition, ride-sharing models like Uber were built on owners that don’t require a full return on their assets.

Managed aircraft models work in private aviation at the cost of high prices, almost incredibly low asset utilization, and demand suppression due to high pricing. These approaches could not differ more from the kind of high asset utilization approach that allows commercial carriers to make money or that Joby has built into its financial projections. Thin networks with episodic demand are utilization killers and Joby will need to figure out how to square that circle to succeed.

Joby’s SPAC should give them the financing to build this model out. They have used their past financing and the prospect of their SPAC to create the most advanced program, the best financing and an incredible team. Set against that talent and momentum are the physics of eVTOL aircraft, which could limit the cost position and therefore the potential for mass market pricing. Creating the commercial demand Joby contemplates will take enormous creativity, relentless innovation and dogged determination. The SPAC should buy the time to make the vision a reality.

Regional air mobility using hybrid-electric aircraft. The rumored Surf deal looks like a growth play on the existing regional and air taxi markets. Historically, Surf has focused on fixed-wing turboprop planes, which cost less to operate than private jets or eVTOL aircraft. Air taxi and regional services mostly fly routes below 500 miles. This market declined over the last 40 years as travelers increasingly substituted car trips for air trips due to unfavorable cost trends for air travel vs. automobiles and increased time spent waiting in airports. At this point, travelers use cars for about 97% of all inter-city trips, so enormous market development potential exists for car substitution.

Next generation hybrid-electric propulsion will create the opportunity to exploit this opportunity. Generally, cars represent a formidable competitor to aviation. They cost about 37 cents a passenger mile at average occupancy — probably a tenth or less of what UAM services will initially cost and about half the cost of operating smaller regional aircraft like the Cessna Caravan or Twin Otter. Upon certification, hybrid-electric propulsion could close this gap and could create a cost inversion where small aircraft become cheaper than traveling by auto. Combined with more direct routing via GA airports, the cost inversion should create a large mode-switching effect. These unit economics probably underlie Surf’s recent agreement to purchase Ampaire, a startup that’s developing distributed hybrid-electric propulsion systems. (DiamondStream Partners has invested in Ampaire.) Rapid development of these lower-cost regional air mobility models may also put pressure on Wheels Up’s private aviation value proposition on shorter-haul routes.

A Surf SPAC could put at least two of the key pieces of the value chain together to produce a lower-cost regional mobility service that can fly into short-runway GA airports. However, since Surf only owns 10 aircraft, it would need to push its operator partners to adopt the Ampaire technology to accelerate adoption and stimulate regional mobility demand. Solid capitalization could help put operator partners at ease with Surf’s aggressive growth plans and lead them to purchase retrofitted aircraft more rapidly.

What is missing? 

Surprisingly, no freight deals have emerged to date. Freight has fared better than passenger traffic during the pandemic and has two high-profile use cases that have already registered at least one big win. On the drone delivery side, Zipline has a last round valuation of $1.5 billion and may soon complete a new round of financing at closer to $3 billion. On the mid-mile freight side, many promising start-ups offer opportunities to invest in a market of equal or greater attractiveness than drone delivery. Look for activity in this space later in the year.

We also have yet to see movement from Part 135 charter operators moving into the regional air mobility business via a tie-up with technology companies. Most regional air mobility and UAM operations would require a Part 135 certification and operating experience. So, air charter operators’ capabilities in these areas and experience with premium passengers could make them a good platform for taking advantage of the new aircraft coming down the pike. They will need technology complements to manage the mix of scheduled, semi-scheduled, charter, on-demand and seat sharing sales models that will enable high asset utilization in the regional air mobility fixed wing space.

The Ecosystem Impact of SPACs

The SPACs will provide market confidence and acceleration for the themes above. First, they provide a clear path for growing demand for last-mile aviation services. This makes investing in all next generation companies and products easier and less risky. Second, the SPACs dramatically reduce funding risks for certification of the technologies and development of the infrastructure needed to drive the growth. Third, it paves the road for the integration of existing infrastructure (e.g. GA airports) and commercial aviation services into the opportunities afforded by the new aerial mobility technologies.

Whether these strategies are fully or only partially realized, they will fundamentally change how we travel. The aviation industry will offer a more integrated transportation system that offers more options, replaces many automobile trips and shortens others. This will require new systems where the customer books from destination to destination not from airport to airport. This could lead to the integration of ride-sharing services and aviation booking. The result will be a much more seamless customer experience.

Indirectly, the SPACs will make it easier to create new aircraft programs faster and more cost efficiently. Today, most of the big UAM vendors have pursued vertical integration strategies to control the entire aircraft design process. This takes a lot of capital, but then again they haven’t had a lot of options. The supplier and software infrastructure required to support these new business models remains in the early stages. The inflow of cash into these companies will provide financial security to potential suppliers and software vendors allowing them to develop sub-systems for new aircraft, reducing the need for vertical integration, and thereby make certifying new aircraft less capital intensive for the airframe company.

The SPAC investments have also created a new path to liquidity for mid-stage investors. The advanced aerial mobility sector has seen robust seed activity spurred on by the development of the seed investment ecosystem and the concentration of aviation enthusiasts in the family office community. In the mid-stages, aerospace start-ups often require significant funding as they move forward towards certification and commercial revenues. Strategic investors validated most of the mid-stage investments for less expert investors until last year when the aviation crisis associated with Covid-19 caused them to pull back on their commitments. These dynamics made finding funding at the middle stages challenging for many companies. While expertise gaps still exist in the investing community, higher confidence around late stage funding options and a gradual return of the strategic investors will make it easier for mid-stage deals to get done. This will help accelerate the ecosystem progress.

Multiple Unicorns and Spectacular Failures

Aerospace and aviation need a lot of risk capital. The opportunities are huge, but also demand high levels of investor support. In many ways, traditional venture capital, with its emphasis on revenue momentum and incremental progress, represents an uncomfortable fit with businesses that need large amounts of capital up-front and take years before commercial revenues start to flow. Perhaps for this reason, traditional funding channels have not offered up financing commensurate with the opportunities to-date. In this sense, SPACs have created a unique opportunity to advance the ecosystem.

This advance will have its risks. SPACs may allow a thousand flowers to bloom, but the hurdles to success and market dominance will remain high. Like its more traditional cousin, commercial aviation, the advanced air mobility space’s winners will create business models, platforms and designs that optimize the economics of flight. These new businesses will need to compete favorably against traditional forms of transit, other well funded business models and designs, and, perhaps most challenging, future business models and designs. The large uptick in R&D funds available through the SPACs will accelerate progress. Will it also lead to the kind of disciplined environment that exists in commercial aviation where current airframe and engine manufacturers give technological developments adequate time post-commercialization to deliver a return on R&D capital?

Another risk for the industry involves the premium nature of the products. The industry’s development depends on public infrastructure, including new infrastructure, and therefore public support. An industry so focused on premium products, at least to start, risks undermining that support. For example, after years of limited utilization, GA airports could face capacity constraints. Increasing numbers of private aviation flights, UAM flights, and regional flights could make some of the more popular GA airports slot or gate constrained. In this environment, competition may exist not only between companies but also between advanced aerial mobility sectors and public support will help determine the scarce allocation of resources.

Finally, we can expect SPACs to create multiple unicorns with impressive defensibility, but also some spectacular failures. Public markets often judge companies by quarterly results and immediate milestones. Start-ups, with their rapid pivots and inevitable challenges, need investor support during times of adversity. As EHang’s recent price volatility suggests, advanced aerial mobility’s current profile could prove an uncomfortable fit for public markets. Inevitably, some of the companies that go public via SPAC will not hit their projections and create disappointment. Others will go bankrupt. When they do, the same public market enthusiasm that has opened the spigots of funding could easily shift into reverse, drying up capital and opportunities even as the industry’s need grows. The innovative, long-term investor lock-ups tied to Joby’s SPAC represent an innovative approach to stabilizing the investor base around these issues.

Despite these cautions, the SPACs will create a transformational impact for advanced aerial mobility. As a result of these investments, aviation will shorten the last mile and in doing so shorten travel times. Most business models will do this at a relatively high price for premium passengers at least in the medium term. SPACs have helped to clarify how this will happen by making specific bets, but lots of uncertainty remains. Look for five key trends in the medium-term —


  • Private aviation will encroach on commercial travel for ultra-premium passengers, but will in turn feel pressure from regional air mobility services and UAM connected commercial flying. Commercial aviation has taught us companies struggle to focus on premium passengers and the mass market at the same time.
  • Look for many experiments using UAM vehicles as a premium direct service replacing cars beyond existing infrastructure. Blade offers one example of how this can work. However, UAM companies have proposed other models as well. The details of how some of these models would work and scale at affordable prices that earn a return on investment remain murky.
  • Commercial airlines will use UAM vehicles to offer a premium connecting service from commercial airports to GA airports or existing heliport infrastructure. This will offer new growth opportunities for commercial carriers and UAM companies alike.
  • Regional air mobility’s affordability, facilitated by hybrid-electric propulsion, could enable it to become the first mass market product in the advanced air mobility sector. When the costs of air mobility fall below the costs of automobile travel, regional air mobility services will grow rapidly at the expense of ground transportation.
  • Look for a SPAC deal in the freight sector later this year. Drone delivery and mid-mile freight companies have sat out the SPAC boom so far. The companies in those sectors should have business cases as strong as some of the UAM SPACs.As with any emerging sector, lots of uncertainty remains. However, given the flood of funding into these concepts, the world can count on a rapid evolution towards new types of transportation that get you where you want to go faster and eventually cheaper.

    Original article published in Forbes on Feb 25, 2021