Electric Vertical Take-Off and Landing (eVTOL) aircraft have been in development for some years now, indeed Aviation Life has followed the eVTOL story since Issue 1 in 2018. The dream of making vertical flight accessible to all, on demand and carbon free, has taken a giant step forward today with the endorsement of UK-based Vertical Aerospace’s VA-X4 project from leading airlines and lessors that have placed conditional pre-order of 1,000 aircraft for a total of up to $4bn.

The VA-X4 is a zero-carbon aircraft that can carry four passengers and a pilot, and fly at speeds up to 200 mph over a range of over 100 miles, is claimed to be near silent when in flight, produces zero emissions and at low cost per passenger mile.

American Airlines has agreed to pre-order up to 250 aircraft with options on an additional 100 aircraft. Avolon has agreed to pre-order up to 310 aircraft with options for a further 190, and Virgin Atlantic has an option to purchase between 50 and 150 aircraft. All have agreed to work together towards the “prompt certification and deployment of aircraft in commercial operations”.

In the US, American Airlines expects to work with Vertical Aerospace on passenger operations and infrastructure development. In the UK, Virgin Atlantic and Vertical expect to work together to explore the joint venture launch of a Virgin Atlantic branded short haul eVTOL network, including operations and infrastructure development.

The orders were announced concurrently with Vertical Aerospace’s announcement of its intention to become a publicly traded company via a merger with Broadstone Acquisition Corp – a special purpose acquisition company (Spac). The combined company has a pro forma enterprise value of approximately $1.8bn and pro forma equity value of $2.2bn at the $10.00 per share private investment in public equity (PIPE) price.

The boards of directors of both Broadstone and Vertical have approved the proposed transaction, which is expected to be completed in the second half of 2021, and is expected to result in gross proceeds of $394 million.

The ordinary share PIPE includes commitments from institutional investors, 40 North and Microsoft’s M12 as well as strategic investors: American Airlines, Avolon, Rolls-Royce and Honeywell.

Vertical Aerospace plans to conduct its first test flight of the VA-X4 later this year and is targeting commercial operations for 2024, once the VA-X4 is certified by European Union Aviation Safety Agency (EASA) and UK Civil Aviation Authority (CAA) to the same safety standards as large commercial aircraft. Vertical maintains that the aircraft will be 100 times safer than a helicopter.

Vertical was founded in 2016 by Stephen Fitzpatrick, an established entrepreneur best known as the founder of the Ovo Group, an energy company determined to create a world without carbon.

“This is the most exciting time in aviation for almost a century; electrification will transform flying in the 21st century in the same way the jet engine did 70 years ago,” said Fitzpatrick. “Today’s announcement brings together some of the largest and most respected technology and aeronautical businesses in the world and together we can achieve our aim of making the VA-X4 the first zero carbon aircraft that most people will fly on. The United Kingdom is already a global leader in aerospace innovation and we believe Vertical Aerospace will be the British engineering champion to drive the aviation industry forward.”

American Airlines, which alongside its $1bn order for 250 aircraft will invest $25 million in Vertical through the PIPE transaction, states that this investment demonstrates the company’s clear focus on emerging technologies to reduce carbon emissions.

“Emerging technologies are critical in the race to reduce carbon emissions and we are excited to partner with Vertical to develop the next generation of electric aircraft,” said Derek Kerr, Chief Financial Officer at American. “For years, American has led the industry in investing in newer, more fuel-efficient aircraft. Today’s partnership is another example of that commitment, and an investment in the future of air mobility. We are excited about the prospect of what this could mean for our customers, and our company.”

Aircraft leasing company, Avolon, has made a confident order for up to 500 electric aircraft valued at $2bn.  Avolon, via its newly incorporated affiliate Avolon-e, will become the launch customer for the VA-X4 and subject to appropriate operating, delivery and business requirements being met, will order aircraft valued at $1.25bn with delivery commencing in late 2024, with an option to acquire additional aircraft up to a value of $750 million.

Avolon-e has been established by Avolon to focus on investment in the zero-emissions eVTOL sector. Avolon states that this investment will introduce the ultra-short-haul aircraft category to commercial aviation, describing it as a “game-changing development that will revolutionise air travel with zero emissions aircraft”. Avolon highlights the fact that this investment will complement its existing young and fuel-efficient fleet with a new category of ultra-short-haul aircraft that will produce zero emissions.

Avolon will join Microsoft, Rolls-Royce, Honeywell, and American Airlines as equity investors in Vertical, working also with Virgin Atlantic who will be a VA-X4 launch airline customer in Europe.

“Avolon is proud to be a launch customer for the VA-X4 aircraft, demonstrating our commitment to a net zero carbon economy and to driving innovation in the global aviation sector,” said Dómhnal Slattery, Avolon CEO. “Our order with Vertical will also accelerate the inevitable commercial roll-out of zero emissions aircraft. Before the end of this decade, we expect zero emission urban air mobility, enabled by eVTOLs, to play an increasingly important role in the global commercial aviation market.”

Slattery adds that as the aviation industry emerges from the Covid-19 pandemic, “air travel will be materially reshaped with airlines needing to embrace emerging technologies that decarbonise air travel. We strongly believe that the VA-X4 will lead this transformation.”

Virgin Atlantic has the option purchase up to 150 VA-X4s and will be assisting with its development, seeking to establish short haul, electric aircraft connectivity between UK cities and airport hubs starting with London Heathrow, Manchester and London Gatwick. Virgin states that its goal with this investment is to “enable sustainable, price competitive, regional connectivity across the first and last 100 miles of the customer journey”. The airline notes that with 37 towns and cities with populations over 100,000 within 100 miles of London Heathrow Airport, the VA-X4 “offers huge potential to support zero emissions short haul transfers for 7.7 million customers outside of London, for flights to and from the UK’s main hub airport”.

“With innovation and sustainability leadership firmly in our DNA, we are excited to be partnering with Vertical Aerospace to pioneer sustainable and zero emissions air travel in the UK,” said Shai Weiss, CEO, Virgin Atlantic. “We pride ourselves on building enduring strategic partnerships and are thrilled to be working alongside Vertical in its mission to bring eVTOL travel to the UK. Our partnership includes an option for Virgin Atlantic to acquire up to 150 eVTOL VA-X4 aircraft and exploration of a Joint Venture to bring short haul, electric vehicle connectivity to cities and our UK airport hubs, starting with London Heathrow as well as Manchester and London Gatwick. Combining the design, engineering and manufacturing expertise of Vertical with the award-winning customer experience and operational excellence of Virgin Atlantic.”

As a founding member of the UK Government’s Jet Zero Council and alongside an existing commitment to net zero carbon emissions by 2050, Virgin Atlantic says that its partnership with Vertical is a further step towards it becoming an “industry sustainability leader – finding innovative solutions to decarbonise aviation”.

Broadstone, founded by British entrepreneurs Hugh Osmond, Marc Jonas and Edward Hawkes, believes that the strength of the Vertical leadership team, coupled with a highly commercial approach and a clear route to market, are among the key attractions for the Broadstone investment team.

“Transportation is one of the next big sectors of the global economy to be disrupted at scale,” said Hugh Osmond, Chairman of Broadstone. “Vertical has a clear commercial plan to challenge short-haul air travel, and to create new markets where neither cars nor public transport can cope with demand. Stephen has built an outstanding management and engineering team with extensive experience in navigating the aviation regulatory approval processes. The team also has an outstanding track record of delivering projects commercially. In our assessment, Vertical has a considerable lead over competitors in this field – and has a clear business model to achieve commercialisation and significant growth.”

Other PIPE investors, Honeywell Aerospace, Rolls-Royce and Microsoft UK, have also expressed their support for the venture.

“Vertical and Honeywell are great partners because our relationship combines the strengths of both companies,” said  Mike Madsen, President and CEO of Honeywell Aerospace. “Honeywell brings state-of-the-art flight controls and avionics systems, and the Vertical team has a tremendous history of innovation and design excellence. We’re doing more than just developing an aircraft, we’re actually creating an industry together.”

Warren East, CEO of Rolls-Royce, expressed his delight to build on the company’s existing relationship with Vertical Aerospace as they take this strategic step to deliver eVTOL aircraft to a global market. “Rolls-Royce is the leading supplier of all-electric and hybrid-electric power and propulsion systems for aviation and this exciting opportunity demonstrates our joint ambitions to lead the way in the new Urban Air Mobility market,” he said.

Clare Barclay, CEO of Microsoft UK, said, “M12’s investment in Vertical Aerospace demonstrates the market opportunity in the growing demand for urban transportation, but historically, expanding mobility hasn’t been environmentally sustainable. Automation and Industry 4.0 is a clear way forward to realize more operational efficiencies and mitigate transportation congestion and pollution.”

Winston & Strawn is serving as legal advisor to Vertical Aerospace and Citi is serving as advisor to Broadstone. Latham & Watkins is serving as Vertical’s legal advisor and Barclays is serving as lead financial advisor and lead capital markets advisor to Vertical. Barclays and Citi acted as joint placement agents on the PIPE.