On a dreary November day in the Cotswolds, England, the VX4 (a cross between an airplane and a helicopter) took off from an airport runway, floated a few meters off the ground, and descended again.
It may not have reached dizzying heights, but for its British owner, Vertical Aerospace, it was a turning point. The company, which has received millions of pounds in support from UK taxpayers, is running out of cash.
Amid critical conversations with investors that could lead founder Stephen Fitzpatrick to lose control of the business to an American hedge fund, the flight offered evidence that the electric craft could transport a person without needing to be tethered to the ground. for security.
Vertical has already experienced what can happen if things go wrong. On a sunnier day last August, an unmanned version of the plane crashed onto the runway after the glue holding a blade to one of the eight rotors failed. The 3.7-ton plane fell 30 feet onto a pile of debris and the shovel landed 50 meters away. No one was injured.
The crisis and liquidity crisis have highlighted the difficulty of making flying taxis a reality after almost a century of efforts. Vertical announced on Tuesday that it would delay by two more years, to 2028, the date when its first aircraft would gain UK regulatory approval to carry passengers.
It had initially claimed the plane, with room for four passengers, 100 miles of range and top speeds of 150mph, would be in service by 2025. Stuart Simpson, Vertical’s chief executive, confirmed to investors this week that it had chosen the UK for a factory to build 200 airplanes a year. However, cautious regulators and suppliers put an end to the ambitious schedule.
A number of startups are trying to build flying taxis, known in the industry as electric vertical take-off and landing (Evtol) aircraft. For a few years, they seemed to be making rapid progress as investors, fueled by cheap money, sought the Tesla of the air.
Flying taxi companies such as the American Joby Aviation and Archer Aviation, as well as the German Volocopter, raised significant sums of money and built flying prototypes. The three largest aircraft manufacturers – the European Airbus, the American Boeing and the Brazilian Embraer – have entered the race through their subsidiaries.
Vertical took advantage of that wave. Fitzpatrick, an entrepreneur whose investments have included a Formula One team and who makes most of his £800m fortune from his energy company Ovo, founded Vertical in 2016. It listed in 2021 on the US stock market. .US with a valuation of 2.2 billion dollars.
However, rising interest rates and development delays have given investors pause before investing more money. Vertical’s share price has plummeted 95% since the Covid pandemic bubble, valuing it at just $110 million.
Lilium, a US-listed rival, filed for bankruptcy protection last month for its German subsidiaries and is looking for a buyer to save it. Chinese automaker Geely was in talks to save Volocopter, Bloomberg reported Wednesday, after its value also fell. Britain’s Rolls-Royce ended its plans to create a flying taxi business almost three years after its plane broke the air speed record.
“There was a huge bubble,” said one industry source. “It’s starting to come to an end.”
In the long term, concerns remain about how flying taxis would be regulated in busy skies. But the industry received positive news when U.S. officials issued rules on how such vehicles could be operated and pilots trained.
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Simpson told investors the company needed about $100 million to cover its costs for next year. It had £42.8m in cash at the end of September.
The immediate cash crunch could be eased if talks with a large lender are successful. Fitzpatrick and Vertical have been in talks for almost a year with Jason Mudrick, an American distressed debt investor who made millions during the pandemic by investing in “meme stocks” such as AMC Entertainment and GameStop.
Mudrick has offered to convert about half of its $200 million in previous loans to Vertical into equity, in exchange for a cash injection of up to $50 million.
However, he wrote in a letter to Vertical’s board last month that he had been “denied at every turn by Mr. Fitzpatrick because he refuses to accept the contractual dilution of his holdings” of about 70% of the company.
Existing shareholders would take only 20% of the company in the deal, although Fitzpatrick has been pushing for 30%. A deal could open the way for other investors to make new investments in the stock. Candidates could include previous investors such as Virgin Atlantic and American Airlines, as well as Microsoft and control systems provider Honeywell.
While Vertical boasts a low-cost model of purchasing off-the-shelf technology from established vendors, it will likely need between $500 million and $1 billion to go four years without revenue.
Simpson said he was “optimistic” about raising capital, even though investors expressed concerns about the delayed launch. But an additional $500 million investment in Joby last month by Toyota and $300 million raised by Beta Technologies have assured some investors that flying taxi companies can still find money, if they can prove the technology works. .
“This is a difficult financing environment and there has been a restructuring in the industry,” Simpson said. “I think we’re going to be one of the winners.”