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A
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B
Avoiding your.
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A
Unfinished home projects because you're not sure where to start?
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B
Thumbtack knows homes so you don't have to don't know the difference between matte, paint, finish and satin or what that.
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C
Clunking sound from your dryer is.
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B
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C
Download today when will this be a normal thing?
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A
Next decade? We'll be certified in 28. We'll be producing these things in 29 and 30. And then it's off to the races. Morgan Stanley put out a report saying this will be a trillion dollar TAM by 2040 and a $15 trillion TAM by, much larger than the automotive market.
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C
For 50 years I've been hearing about flying cars. They're in every movie about the future. They're on TV shows. They're what everybody suddenly cites as the thing of the future. And it has been decades of nothing. But after all that waiting, we actually almost might be finally there. Welcome to Solutions with Henry Blodgett. We're talking to Stuart Simpson, the CEO, and Jason Mudrick, the investor of a company called Vertical Aerospace, which is a UK based public company that makes flying taxis. So this is an industry that a few years ago in a hype cycle on Wall street, gave birth to dozens of companies. There's been a big shakeout. There are now three public companies left and other private companies. This is a company that actually has an aircraft that flies and it is in the business of getting certified. This podcast is about solutions to big problems. If there is one problem that almost all of us can relate to, it's the fact that being stuck in traffic sucks. We have been trying for many years to figure out ways to get out of that, here is a new, cool and very close to actual reality solution. Welcome. Let's just start in why, actually leaving the childhood excitement away. Why do we care about flying cars, flying taxis? This is the electric vertical takeoff and landing industry. Why do we care? What problem are we solving here?
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B
First of all, Henry, thank you very much for the invite. It's great to get a chance to talk about vertical why we care. I'm sure many of you, well, I'm sure you and many of your listeners have traveled all around the world. And when you get to the global megacities these days, of which there are more and more, they don't really work. Whether it's getting from downtown to uptown or getting from the airport to the central business district, it doesn't matter if it's Sao Paulo, Seoul, Tokyo, Osaka, L.A. new York, the infrastructure doesn't work. So across the whole world, people are trying to find a solution to this. You can't dig out of it. Tunnels are too expensive, take too long. And frankly, underground is already pretty busy. You can't build out on the surface. The roads are already clogged. You might be able to lift things up a little bit, but that takes forever and is so expensive. So you look up to the skies and the skies are pretty much free. Because of some of the challenges with helicopters at the moment, our product completely solves all of those problems in terms of getting around in the global megacities and completely replaces helicopters. Because we're silent, we're safe. It's a complete game changer. So we care because the cities are going to get bigger and bigger over time.
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C
So you mentioned your product. Describe it for those of us who haven't seen it.
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B
So our product is sized like a helicopter, wingtip to wingtip. It has wings rather than rotors, fits on a helipad. It'll take off vertically like a helicopter. Then it accelerates. The rotors at the front tilt forward. We accelerate and fly on a wing, which is incredibly efficient, which means it works with current battery technology. And then when you get to where you want to be, the rotors tilt back and you land vertically. So takeoff and landing like a helicopter, flying like an airplane.
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C
So the vertiports, which I think the launch pads are described as, these are effectively helipads. Are we going to be going to airports for these? Where are they built?
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B
Well, the helipads are already out there, so we can use those. All you need is an electric charger there, so that infrastructure is there. And one of the things I like to Kind of explain to people why this is really coming to pass. Now if you look on Google Maps and you look at LA from above, you can tell the age of the buildings. So back in the 60s and 70s, the buildings had helipads on because the wealthy traveled in. It was the way to get around in la. But they were licensed out by the residents because of the noise and they're not as safe as they could be. Now what we hope to be doing over the next 3, 5, 10, 15 years into the future is that infrastructure coming back into use, new infrastructure being there in and around the global megacities to really transform urban transport. The highways in the sky is the vision.
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A
Yeah, 90% of existing helipad infrastructure will support our aircraft. But these aircraft are not just going to displace helicopters, they're going to displace auto and rail to some extent. And we'll get into that. So these vertiports are going to start opening up. Think about instead of driving to jfk, you drive to your local vertiport, park your car there, go through TSA security there, fly into JFK and board your plane. Okay. Or maybe the better example might be Heathrow where Heathrow is losing traffic to Gatwick or some of the other airports. So you fly to your vertiport, take your EVTOL into Heathrow, board your plane.
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C
And are there different kinds of these? Because I gather there is a company in China that is actually operational. You can fly in them now. But it sounds like a different application than what you're talking about.
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B
Yeah, there are many different applications. The core bit of this industry, back to where we started 50 years ago fantasy, five years ago this was really frothy with the de SPAC era. Probably 100 companies doing it around the world. And there's now been a shakeout driven by physics and funding. And the industry is real now. We are flying a full scale piloted aircraft. We will be certified in 2028, opening up the whole global market. Now within that, in China, they're doing some stuff at a low safety standard. A couple of people. It's not what we're doing. We are engineering our product to the same standard as an Airbus. A large passenger carrying jet, 10 to the -9. One in a billion chance of failure. And this is what sets us apart. No one else is doing that. Others are playing in the same space because there's different rules around the world. But if you want to fly in Europe in a densely populated area, so any of the great cities of Europe, you've got to be certified to us and we are the only people in the world doing it.
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C
And so what is the advantage versus a helicopter or Jase, as you were saying, rail. And I understand nobody wants to be stuck in traffic for a few hours. So I get that if you can afford it, but why not helicopters? Blade, for example, in New York has been doing this for a while.
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A
So helicopters are dirty, okay? They're a combustion engine. Our aircraft are zero carbon emission. Helicopters are loud, which restricts a lot of areas you can use them. Try taking a helicopter out to the Hamptons. You can't. You have to go out along the water and then cut in. And every year there's a fight with East Hampton airport and the local residents about the noise. Their helicopters are very loud. They're perceived to be unsafe. Okay? EVTOL solved that problem because we have complete redundancy. Also, 9 out of 10 helicopter accidents or pilot error. And these planes basically fly themselves. And this is the most important thing. And this is the economic differentiator that really convinced us of the business case. They're cheap to operate, okay? Helicopters are basically 70 year old technology. They were invented in the 1940s and there has not been a lot of advancement since. On a single engine helicopter, there's over 70 single points of failure. It doesn't mean it's necessarily unsafe. Statistically speaking, they're perfectly safe. However, there's a tremendous amount of maintenance required when you have that many moving parts, fluids, points that could fail and cause a catastrophe. So for every hour a helicopter flies, it needs three hours of service. Okay? That makes these things incredibly expensive to operate. Cost prohibitive for many. For every hour an EVTOL flies, it needs one minute of service. When you start to understand that, you start to say, wait, you could actually get to the point where this will cost the same as an Uber Black. And when you start thinking about it in that economic or, you know, unit economic dynamic, you start to say, well, this could replace displace rail to some extent, auto to some extent, and yes, helicopter.
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C
And so what has to happen? I mean, we're not even flying yet, so what has to happen to flying? But I mean, I can't go and press an app and get my flight at the airport. What has to happen for the cost to come down that much?
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B
Well, if I just build on what Jason said, he's absolutely right. The economics is the key. That and the sound, the noise is the key unlock. We have an amazing customer base. American Airlines have signed up for 350 of these. We got Japan Airlines, AirAsia. So we've got real customers that understand this space. Bristow, the world's largest helicopter operator, has signed up for 100 of these. So we have real customers that understand how to use these. The cost point that Jason mentioned is now when we launch that, the cost is at that $2 per km. So it isn't a cost challenge here. The reason for that is when we sell the aircraft, it's got at least a 20 year lifespan. So you amortize that out. So the cost is not prohibitive at all. The key is, as Jason said, this asset can be deployed effectively 23 hours a day, 365, because there is so little maintenance to do. So what that means is the actual cost does come down to around $2 per seat per kilometer, equivalent to an Uber black or for listeners in London, a black cab. So we hit that literally out the gate, which is fantastic. Absolutely fantastic. Now the price point's something different. Now the way I think about that is living in London, when Emirates came in into the airline market there, they cleaned up on flights through to the Middle east because what they did was they bookended them by sending a limo to your house. So if you now think of the transatlantic flights, American, one of our key customers, they can transform and own that market in and out of Heathrow and into the city, because they can bookend with us into the city from Heathrow and then back out to it. And then when you land in New York, in and out JFK with our product and as Jason said, you can cross customs at these. Once these are up and running and that takes out four to five hours in terms of your journey, which is transformational. On a seven hour journey from London to New York, then you've got the two hours either end. If you take that two hours at either end, four hours and take it down to half an hour, transformational for people. They will clean up.
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A
It will take seven minutes from JFK to the South Street Seaport out your window.
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C
And you mentioned safety, which with anything new, folks are going to be very concerned about that. Talk about that like what has to happen. You're engineering, as you say, to commercial standards.
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B
So we're really lucky. We're designing this product under what's called special condition VTOL, defined by EASA, the European safety regulator in 2019. So you can go on the website, you can double click and create the engineering work stack so they're very clear on what you have to hit. And this is back to what I mentioned earlier, the one in A billion chance of failure. So we know exactly what we are doing and we are working through that. It's very transparent, very open. It's not quite the same with the faa. It's a bit of an opaque process. So it presents a bit more of a challenge for our competitors.
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A
Just to be clear for your audience, one in a billion is the highest. It's a theoretical standard, but it's the highest safety standard in aviation. It's also known as the 10 to the -9 or one fatal flight hour out of a billion. It's the same standard that a large Airbus or Boeing aircraft would be certified under. The highest. There is no higher safety standard in aviation.
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C
And just because none of us or most of us are not familiar with these aircraft. When I look at your schedule of testing and the different phases that you go through, and please talk about that. And then looking at some of the other companies, I think Archer is talking about its own schedule. It sounds like one of the key moments in flight is you lift off on the rotors and then you convert to what's called wingborne flight. Is that a particularly hazardous moment? What is the. I mean, talk about that. And what happens if the engines quit?
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B
Let me do that one first, because that's an easy one. We have eight batteries. Each battery is connected to four rotors. So if a battery fails or an engine quits, we can fly with two of the epus failing. But as Jason said, they're designed never to fail one in a billion chance. And just to contextualize that, if you take every Boeing 747 that was made, they've done under 200 million flight hours, yet they're engineered to fail one in a billion. That's what we're doing now. The reason safety is so key is this is mass transport. We're going to be building thousands of these out. So having the highest safety standard we think is paramount.
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A
Let me just drill down a little bit. The key to safety. One of the key things for aviation safety is redundancy. You need to know that if you hit a flock of geese or if there's some sort of mechanical failure, you're fine. The problem with most helicopters is they have one rotor. They may have multiple engines. You'll have a dual engine or a single engine, but they have one rotor. If you have an engine problem, what do you do? You go down. Okay, with a plane that has one engine, which wouldn't meet the 10 to the minus nine standard, you would need multiple engines. But with a single engine plane, you at least glide. You find a place to land. Hopefully you find a place to land safely with a helicopter. You go into a controlled descent. You don't just fall, you go into a controlled ascent. But whatever's below you, that's where you're going. The difference with EVTOLs is we have multiple engines. Our aircraft has eight engines. If we hit a flock of geese, one of our propeller breaks, we move to six for balance, you could still finish the mission. You hit another flock of geese and another propeller breaks, you're down to four engines. You land. But you can fly with four engines. Like, that's the key. It's redundancy that the old helicopter technology did not have.
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C
And what happens if, for whatever reason, you lose four or five engines? Is it auto rotate? Are you gliding? How does that.
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B
You would glide in, let's say. I mean, we've never imagined all eight batteries, all eight motors not working. But as Jason said, it's got a wing. Right. So you glide down and come into land. But I mean, the chances of that are far more remote than what?
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A
Statistically speaking, to lose five engines is almost impossible.
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C
No, I'm sure. But I just as I. I have a very basic pilot's license, and I know with a fixed wing, single engine, I know what happens when the engine quits. It's nice to know what happens here. So you're flying as an aircraft at that, I mean, airplane at that point, not a helicopter.
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B
Absolutely.
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C
And what happens in.
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A
If you're in forward motion with wingborne lift.
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C
Correct. What happens if it happens in the takeoff phase?
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B
Actually, we're not too worried about that because there's literally, once we certify the aircraft when you're taking off, and this is the only bit we've got to do. By the way, you talked about transition. We've taken off vertically, accelerated to 30 knots, all done, proven out. We've flown like a conventional aircraft, 150 miles an hour, slow down to 70, just above stall speed. We're just proving out these two little bits, the final acceleration, the final deceleration in those. First of all, when you're taking off, you're barely above the ground right. As you accelerate. So there's really negligible risk if in this one in there, I mean, you can never imagine it happening, but you just land back down from a pretty low height because you're at such low height as you accelerate off before you're on the wing. Once you're on the wing, you can glide back down. And again when you come in to land, you don't start hovering at a very high. You come in and then you hover for the last bit. So actually, this is transformational from safety. From a safety perspective, just to be.
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A
Clear, tilt rotor aircraft technology has been around for a long time. I mean, the Harrier was invented in the 70s. This is not novel technology. What's novel about it is that we're using batteries to power these EPUs. That's what's different. Right.
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C
And I gather one of the issues or the things that have slowed down the industry is regulation, and talk about that, because I know you're engineering your plane for worldwide use.
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B
Sure. I'll give you a bit of my background. So I did the first drone flight in the uk. I led the company, I think it was CEO at the time, had got the first drone delivery in the UK done. So it took about 18 months of negotiating with the government to get that done. But I know how to do it. I am part of a UK government body called the Future of Flight Industry Group. We work with a couple of the ministers on it. The Aviation Minister in particular is part of that. And the government have been clear. They funded this group, they put $30 million on the table and they have said, these things will be flying in 2028. Now, in response to that, President Trump issued an executive order recently to say, right, let's get on with it over here. Which is great. The industry wants all of this excitement and press, but this is part of the shakeout in the last five years. I said, as this has become reality, a few years ago, people didn't know what was going to happen. But we're seeing all around the world, in the UK there's a Future of Flight Industry Group over here. You've got the executive order in Japan, Korea, the governments are all over there. So I met with Regul in Japan last year. They really, really want this stuff and they're putting in place the regulation to bring it to life.
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A
Yeah, but let's just be clear. You said the regulators are slowing down the process. That may be technically correct. But this is a highly regulated industry and it should be. Safety is the absolute most important thing. If we want this industry to survive or to thrive, we need consumers to be comfortable that when they get in this aircraft, it's safer than an automobile, which, statistically speaking, it will be by many, many multiples. Right. But otherwise people aren't going to get in them. Right. So we want regulation. We want. And by the way, that's why it's so Capital intensive. It's not capital intensive because we're spending so much money on parts, although we also are spending money on parts. It's that we have over 400 employees, all with salaries and benefits, and we have zero revenue because we can't sell these aircraft or commercialize this business until the CAA or easa, which is the regulators in the UK and Europe respectively, until they sign. And in the US it would be the faa. So this is a highly regulated industry. Rule of thumb to certify an aircraft is a billion dollars in 10 years. And that's about what it's going to end up being for us.
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C
And so we're in 2025. When will this be a normal thing that normal people who would take Uber Black, for example, would actually use?
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A
In my opinion, next decade. Next decade? Yeah. We'll be certified in 28. We'll be producing these things in 29 and 30. I think broad consumer adoption you'll start to see next decade. And then it's off to the races when you start talking about 2040 and 2050. Maurice Stanley put out a report saying this will be a trillion dollar TAM by 2040 and a $15 trillion TAM by 2050, much larger than the automotive market.
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C
And you talked about the application of megacities where we're commuting to airports, effectively, what else?
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B
Not just in and out of the megacities, but around and within them. You try going anywhere in New Delhi, Mumbai, Seoul, as Jason said in Riyadh, that whole infrastructure. But also you just expand out from that. It isn't replacing the helicopter, it's growing the transport. It's into emergency services, ambulances. We're working in the UK looking at moving doctors around because you have a specialist brain surgeon who works at one hospital, they typically work in another one. If you can move them around quickly, you suddenly create more opportunity for benefits for people. It's incredible.
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A
First obvious use case is last mile for VIP or first class for aircraft. That's where all the demand we've pre sold 6 billion of these all to aircraft IS. You land at JFK, you're pulled off the first class cabin, you're put on an EVTOL, 7 minutes later you're in Manhattan. That'll be the initial use case. But then two cities that are reasonably close but with a lot of congestion. Then going from New York City to Greenwich during rush hour or London to Cambridge as two examples. Two cities that have bodies of water in between them. Think about all the ferries that go back and forth in Indonesia. Are going island hopping in Greece. Those are like sort of obvious use cases. Then you get into everything that Stuart's talking about. Cargo transport, emergency response, organ transport.
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B
Okay.
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A
Then you start talking about, and I know we're going to get into this, but when you can start going longer range because battery technology continues to densify and be able to have more energy in smaller packages, you start to go farther, you open up even more use cases and you start to put hybrid engines in these, which we can all do. And we have a hybrid engine ready. We're going to put it in our third plane next year and start flying it now. You can go 1,000 miles and that opens up a tremendous amount of you. Then you basically, anything a helicopter could do, you could do right now. This is anything inside, you know, 100 miles when it's fully electric. Once you put a hybrid engine in, it can go anywhere, cheaply, safely, quietly.
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C
So the usage, density you're talking about, I'm starting to see the movies of Star wars or whatever universe it is with the clowers going back and forth. And sometimes in Blade Runner they're just flying all over the place. Everybody's going. Sometimes they're in these neat little lanes as if they're on roads. Talk about air traffic control. Is that the same system that we have now? Is there a new system for this? Is there a big government piece here that has to be built to support this?
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B
So maybe if I start and hand it to Jason. I was working in the automotive industry for 16 plus years. I remember trying to work on self parking cars 25 years ago. Regulatory nightmare because you've got children and pets and old people and bicycles all around you. Just really difficult when you look up in the skies, it's actually really easy. Every aircraft will have a transponder in it. They can stay out of each other way. Every single one will know exactly where the other one is. And because as Jason said, these things effectively fly themselves, they just stay apart and it revolutionizes. And actually putting these things into highways in the skies is actually relatively easy. Once you've got these certified and up in the skies, it's not the same as trying to do it on the ground. Where we've been wrestling with self driving cars for many, many years and we're still not there. So that where you go from customer adoption to self driving, self flying is way shorter in this industry. Way shorter.
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A
I think fundamentally it will look like some concept of air traffic control. But we all know with all the air traffic control issues we've had recently that ATC needs to modernize. So I think ATC will look very different. But I think fundamentally the body that regulates where planes can fly, how high, when will be centrally controlled in, you know, in regions like there'll be districts. I believe ATC will all be AI controlled at some point. There's no reason that people that have had late nights and are subsipping on coffee should be up there telling planes when they should land. But that's an ATC issue. But I think ATC will control this. Just like helicopters and light jets.
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C
And when you mentioned the planes all knowing where each other are, that just in one family, like one operator or all planes, all planes.
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B
I mean it's very, very.
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A
Why don't we have that now?
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B
That seems kind of basic for me. I find it fascinating. I'm not an industry guy. I'm not from the aerospace industry. So I've come from a different background. So you look at it and think, listen, this is an obvious way that this industry sets the new generational standard for how aircraft behave in the sky, how you interact with air traffic control.
- [25:28]
A
Legacy.
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B
This is how you set it up. Because exactly as Jason says, everything's legacy. This is the future. It's a clean sheet of paper. And being part of the future of flight industry group in the UK working government, we can influence and set that. And this is exactly what we're doing. Exactly what we're doing.
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A
If you take a tourist helicopter around and go see the Statue of Liberty or you know, sore subject, but the helicopter that went down in the river three months ago, that's a Bell 206, okay, that's a 1960s helicopter, which means it was 1950s technology that got certified in the 60s. This is a large component of the recreational helicopter fleet. Out there is literally 60 to 70 year old technology. Technology has advanced. This is the way when I really understood this industry is that this is just, you know, like EV cars are great, okay? They're green, they're actually faster, they're easier to drive, they're cheaper to operate. They don't really change your experience of getting around though. Okay. This is modernizing legacy technology.1 but it's the modernization allows us to do something very different we could never do before.
- [26:36]
C
And I was interested when I was reading up on Vertical Aerospace, what you all are doing and some of the other big manufacturers we'll talk about in a minute. You guys are using pilots, I assume that the technology can fly these things absolutely fine as it is. I know the company in China It's a different aircraft, different application, no pilots. Why pilots?
- [26:58]
B
I think at this moment in time, having a pilot in the aircraft is the single most important sensor you have. So our pilots have got 30 plus years. They've all flown fast jets. It's an amazing way to drive forward your engineering learning. So that's one reason. But actually, when you talk about commercial introduction, there's two barriers. First of all, you've got a regulatory one. So trains don't need drivers, but most trains have a driver. Regulations drive that. The second is customer acceptance. So customers still don't get in a car without a driver. So to think of suddenly putting an aircraft where you're used to having not one, but maybe two pilots on it is a but. Your point that do you need them? Absolutely not.
- [27:42]
A
These things fly autonomously. From a regulatory standpoint, there's going to be a pilot in there initially. I think the consumer will adopt it sooner. The regulator will approve it sooner. Ten years later, they'll probably all be autonomous. I mentioned earlier, 9 out of 10 helicopter accidents are pilot error. These fly themselves. I mean, I flew one. I don't have a pilot's license. I got in a simulator, took off from Cotswolds Airport and landed in a friend's backyard. No training. It's that literally a seven year old could get in there. It's a joystick and a couple pedals and some knobs. It's that easy. There's no pilot error. And that. So yes, they can fly autonomously. I just don't think they will initially. For all the reasons that Stuart mentioned. Abercrombie is an official fashion partner of the NFL. And I'm CeeDee Lamb, wide receiver for the Dallas Cowboys. You know I'm here for Abercrombie's Cowboys gear. That's not a question, but I need a whole wardrobe to go with it. No shade to the guys, but I'm used to having the best tunnel fits. This season, Abercrombie has me covered. Shop NFL by Abercrombie in the app, online and in store. This episode is brought to you by Indeed.
- [28:55]
C
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A
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C
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- [29:20]
A
Terms and conditions apply.
- [29:22]
B
Martha listens to her favorite band all.
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A
The time in the car, gym, even sleep.
- [29:30]
B
So when they finally went on tour, Martha bundled her flight and hotel on.
- [29:33]
A
Expedia to see them live. She saved so much she got her.
- [29:36]
B
Seat close enough to actually see and hear them. Sort of.
- [29:41]
C
You were made to scream from the front row.
- [29:43]
A
We were made to quietly save you more Expedia made to travel savings vary.
- [29:49]
B
And subject to availability.
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A
Flight inclusive packages are atoll protected.
- [29:53]
C
So you mentioned 10 years or within a decade that this is a very common normal technology. What has to happen and why 10 years as opposed to next?
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A
I said next decade.
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C
Next decade. Next. Sorry, that's five, five, not ten.
- [30:11]
B
So what has to happen? The first thing is certification. That is the big unlock for the industry is certification. I genuinely think we are best positioned within that industry. We have a clear standard on a website, double click download, that's what we have to hit. There's no behind the scenes trying to negotiate a way through it. We're on track to certify in 2028 in our customers hands immediately thereafter. And as Jason talked about, we are doing this to the highest global standard that opens up the world because you can effectively passport into all the other markets around the world.
- [30:43]
A
Our aircraft will be exportable everywhere. The US competitors will not be exportable into Europe or the uk, despite what they're telling people. We have confirmation from EASA and the CAA that they will not allow anything that's not to the minus nine to fly over populated areas in Europe.
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C
And is that why I think one of the competitors, Archer, is launching in Middle East? Is this like a different regulatory environment?
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A
That's what they're saying.
- [31:12]
C
I mean this is something. When Amazon first demoed its drones for delivery, I remember Jeff saying like, you know, by the way, these actually work. We're ready to go, but they won't work. Let us fly them here so you can't have them. So is that another?
- [31:26]
A
We don't think that the UAE regulatory body is going to allow non FAA certified aircraft to take passengers. They are telling the world differently. I don't mean they, the gc, the Gulf regulator, I'm talking about Archer and Joabi. But we don't think they're going to compromise on safety.
- [31:47]
B
And let me just build on that. First of all for us the most important thing is highest standard in the world opens up the World 2028. We're clear about that. The key to this is actually the insurance market. Now the insurance market looks to two bodies. The faa, global gold standard, easa. The global gold standard that's the stamp you need to be able to really put these products in the sky because you can get insurance for them. Flying in the Middle east is great. It's eyes on the industry. All of that's fantastic. I want the industry to succeed. And what I mean by that is we can all be winners. The demand is going to outstrip supply way through to 20, 40, way through to then as supply chains come online because the use cases are immense. So I want everyone to win.
- [32:36]
C
And will insurance be a big part of the costs of manufacturing them? And I ask because I don't know much about plane manufacturing, but at least small planes. Yeah, there are not that many parts in them and they know how they work and yet they're incredibly expensive. Because my understanding is because of the.
- [32:53]
B
Insurance, it's not a big part of the overall cost package for an operator on these because they're so safe, but it's a key unlock if you want to fly these with people in over a densely populated area. First of all, get the safety standard right. Second of all, certified by one of the bodies that the world looks at and says, okay, hey, we understand. These guys are brilliant. That's the goal, to send it.
- [33:15]
C
All right, let's talk about Vertical Aerospace, your company, public in the uk Jason, you are a contrarian. At least that's what you say. So that means that you run in when everybody else is running away screaming. And as I understand the story you came upon Vertical Aerospace and company was not in great shape. You came in, have now taken control of the company. I know nothing about the industry. I looked at a few different companies in the industry and I, I thought to myself, well, interesting. This company does seem very credible. It's great, it's exciting, but not that much cash compared to some other big companies that are out there burning 100 million plus a year has less than that in the bank. And having been a CEO, that would be a situation that would give me a little bit of anxiety. So where are we? Why did you invest your capital and what is it that you can do relative to competitors that do seem, from a glance at the financial statements, to have a lot more money be farther along?
- [34:15]
A
Well, you're, you're correct. I view myself as a contrarian. In fact, the first job I had after leaving Merrill lynch, where we overlapped in 2001, was at a firm called Contrarian Capital.
- [34:26]
C
There we go.
- [34:26]
A
Where I spent seven years learning how to invest as a contrarian. But you're right, I mean, look, we're looking for A disconnect between where we can invest or where securities are trading and inherent value, intrinsic values, like we, as we like to say, and a contrarian mentality can afford you those opportunities. So what I found fascinating, and what I still find fascinating about this industry is if you rewind four or five years ago, okay, there was 50 or 60 companies trying to do this. We were in the bull market of SPACs. They were all going public at frothy, excessive valuations, and they were all raising money. And then the SPAC market burst and people lost focus, but the money was raised. And the players that raised money went out and spent money on engineering and designing and certification exercises and building these aircraft. And two things happened, okay? One, some people spent the money the right way and some people spent the money the wrong way. And those 50 players have basically narrowed the field down to a handful of players. Systems that did not involve wing lift, went by the wayside, lost access to funding. There was one company that had put their rotors inside their wings, which aesthetically looked great, but they had 32 engines and it just consumed too much power for where battery technology had evolved to. So it just didn't work right. So what the industry has defined itself as these multi engine tilt rotor systems seems to be the best technology. The second thing has happened is funding. When the SPAC market burst, funding became very challenged. So those that had access to funding and had the right technology have clearly become the leaders. So what I liked about it is this was an industry that I could analyze because the money that vertical had raised four years ago was being spent so I could go sit in the plane, touch the plane, talk to engineers, talk about our approach, understand if we had the right technology or not. And yet the valuation was, it was basically left for dead. Nobody was talking about vertical. There was no investor relations effort, There was no public relations effort. It had a capital structure at the time that was somewhat prohibitive to capital raising.
- [36:49]
B
Well, we can fix that.
- [36:50]
A
And we did fix that. And since we fixed that, we've raised $160 million just in the last six months.
- [36:55]
B
Six months, yeah.
- [36:56]
A
Yeah.
- [36:57]
C
Terrific. And so where are you now and what is the, I mean, what's the competitive difference of the aircraft that you're building versus Joby and Archer and some of the others that are out there?
- [37:08]
B
So I'll answer that. Can I just be very clear? You mentioned we had less cash than we need. We, as we sit here Today, we got $140 million in the bank. It's enough to take us in the middle of next year. So we're in great shape at the minute, just to be clear. And we got a capital market day coming off on the 17th of September where we'll be expanding a lot more around that. So just so you listeners can know, what sets us apart, we've talked a lot about it, is safety. We are the only one in the world that will have access to every global market that is really, really fantastic. We have.
- [37:41]
C
And what would your competitors say about that? Because I assume that they're not going to run out and say, hey, yeah, we're not as safe, no problem, we're faster.
- [37:48]
A
I'll tell you what they'll say because they've said it publicly and they've said it privately. They will say that IASA and the CAA are going to conform to the FAA standards. We do not believe that's the case. We believe that the CAA and EASA are going to stick to the highest safety standard. Okay, maybe over non populated areas, going from island to island in Greece, they'll let something that's a minus 8 or a minus 7, a lower safety standard, more like a light jet standard, fly, but not overpopulated areas. And if what they're telling us is correct, okay, the competitors in the US planes will not be able to operate over densely populated areas in Europe. And we will.
- [38:29]
C
And what is it that you have to do to meet that standard that you don't have to do to do a negative 7 or negative 8?
- [38:36]
B
Jason Mason mentioned it earlier. Basically redundancy across all the systems, that's the key. So we've known from day one we were hitting that standard. So we've built it in all the way through whether it's flight control, battery management, batteries. I mentioned eight batteries linked to the full rotor ground up. We're engineering to that standard. So safety is the first thing that sets us apart. Next, we've got cabin capacity. We've basically got the biggest tube under the wings. So there's some great pictures out there. If you get a chance, jump in the competitors airframes, they're pretty tight. We are launching with four business class seats. As Jason said, you can imagine the business class first class passengers whisked off into this. It'll be a luxury experience. And incredibly importantly, you can take your luggage. The others don't have the luggage capacity. So you can take your 30 plus kilos for each of the four passengers. They fit in the tail. The aircraft takes off. No one else can do that.
- [39:29]
A
If you sit in Joby's Aircraft. First of all, there's no separation between pilot and passenger. So if you sit in the front row of seats and lean back, your feet touch the back of the pilot's legs, it feels like you're in a MRI tube and there's no baggage capacity. From a feeling of comfort and safety. I've sat in both aircrafts. Just fears feels more substantial. You feel safer.
- [39:55]
C
And so why is it? Because they have investments from Toyota, I guess in one case, not a, not a noted airline manufacturer, but that's okay. But United Delta, I gather you have pre sales too. But how do those conversations go? Like what is the.
- [40:10]
B
I'll give you my take on it. Jason knows the company long known the company longer than me. I've been here about two years, but I was asked to join the company two years before I joined it. And I spent two years looking around, talking to investors, analysts, customers, supply chains. And something came back about Vertikal from everyone that I talked to, which was that vertical was an aerospace company. Now if I looked at the top team as I got to meet them, we have certified over 30 different aerospace products. Now that is embedded in what we do. We know how to do it. Remember, certification unlocks insurance, unlocks the market. So that sets us, us apart. It definitively sets us apart. The other people started differently. They sort of designed something and they're trying to brute force it through legislation without understanding how rigorous certification is in aerospace. And back to Jason's point around the moat around Europe, the vision here is mass transport. Now if you think these are going to be flying above people, you want that as safe as humanly possible. Because if they come down, down, they come down. You don't want that. So you make them as safe as humanly possible. And we have done that from day one.
- [41:21]
A
And it's a design feat. You asked why it's a design feat. The more sturdy and safer you make a plane, generally speaking, the heavier it's going to be. The heavier it's going to be, the less far it's going to go. So you're balancing mission with safety. And that is the art here. So as Stuart said, what attracted me to Vertical when I was in my contrarian mindset mindset was that they're building a plane that they believe can be certified, building a plane to be certified. Whereas a lot of the U.S. some of the U.S. competitors are building a plane that they think is the most advanced and coolest and highest engineered plane and then hoping the regulator will certify it. Like I'll Give you an example. Not to name names, but every rotary aircraft certified under the FAA has the landing gear have to be built to 150% of what any model would show as the maximum impact it has to withstand. 50% more than whatever model would show in a controlled ascent post engine failure, you hit the ground, no problem. Okay, we're building our aircraft to 150%. One of our competitors built their landing gear to 115%. Not to name name, but their view is, well, we're never going to have a controlled descent because we have multiple engines. Okay, that might be academically accurate, but now you need to convince the FAA who've never certified an electric aircraft, ever. Textron's been trying to certify the Pipistrol, which was certified four years ago in Europe. In the US they still haven't certified it. And that's a single prop, one plane, two passengers, basically a training plane, fully electric. Hasn't been certified here. Okay. The US guys are hoping that they can convince the FAA who have never certified an electric aircraft to certify a multi engine tilt rotor vertical lift horizontal flight engine that doesn't meet standards of every rotary aircraft that's ever been certified in the U.S. okay, so safety mic drop.
- [43:24]
C
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- [45:30]
C
It seems like another differentiation is that you are just building planes to sell. Whereas I noticed that Joby, one of the US competitors just bought blades operations. It's like they seem to be going into the operating business. I think Archer is doing the same thing. Is that another differentiation?
- [45:49]
B
Yeah, it is. If you think of the value chain in aerospace, the places where the sweet spot of where you make money is you design, engineer, assemble and service an aircraft, we're doing that and we're leveraging amazing supply chains. So they now certified they'll help us build the best aircraft. The other place you make money is the power system and we are designing our own batteries. Every airframe we sell will buy a battery from us once a year at a 40% margin. We control that bet. We don't do the operator risk. We don't run airports or vertiports. We have got the sweet spot and I genuinely think it sets us apart. And I think from an investor perspective, I look at our market cap versus the others. There's a huge dislocation that we're slowly addressing as we get out to tell the story like we are today. But as people understand, wow, these guys are deploying capital on the two places you make money. No distractions, no operator risk. This is a great business model. That's one of the things that Attracted me to it as I was doing my research before joining and talk about.
- [46:51]
C
The batteries because I know that's something that you feel like is a real core competency and that's obviously been a huge topic on the car side and scaling up. So we electrify everything.
- [47:02]
B
Yeah, I think as Jason mentioned, we sized the aircraft from day one to be larger. Now that drove back into the battery. So we knew from day one we're not fighting to build a bigger battery. We knew what we needed from day one. One we tested over 500 cells. We then down selected to around 25, tested them thousands and thousands of hours down selected to five, ultimately one. And we've done millions of hours of testing on the cell so we know it works. We take 12,000 finger sized cells, we package them, we thermally insulate them, we write the control software, we ensure that they won't burst into flames or if they do, it's sealed down and we create this propri battery pack which is certification ready. What I mean by that is the two key tests for the battery. And if you think, as Jason said, Pipistrelle, this electric aircraft's been certified in Europe, hasn't in the usa. It's a thorn for the regulators. So to get to that point, why we understand and believe we can certify it, you look at the regulatory model, they look outside to third parties to guide them. So they look at the best academic organizations in the world to advise them on how you would think about certifying a battery. Fantastic. We have been chairing the organisation EASA has looked at for guidance. So we know intimately what the rules are, how they work and our battery conforms to those standards. And we've passed the two big tests. The drop test. Build a battery, drop it from 50ft, can't explode past it, put a battery explode a couple of cells in the corner and it stops it bursting into flash planes. We've passed it, so we know how to do this. We have solved it and it is an incredible engineering feat.1 statistics show how powerful it is. Our battery has the power of 27 Cadillac Escalades. 27. Yet the whole aircraft weighs the same as one Cadillac Escalade.
- [49:04]
A
But just to give you an idea of how big these batteries are, it's half the weight of the aircraft. This is. And as Stuart, it's not the cell, that's the, the, the differentiator here. Like we're all buying ourselves from third parties. It's how you put the cells together, package it in a way where you have enough power to do what you want to do with as little as weight as possible. Okay. Again, weight, mission issue in a way that's safe, right? That is. That is the art. It's not the cell specifically. The cells will continue to get better and better and better. Those are, you know, we buy ourselves from Taiwan. There's they. You can buy them in Korea. They're making them. It's how it's put together other. Into a way that's certifiable and can still deliver the mission you're trying to accomplish. But I want to pivot to make sure it's something. There's the. That the batteries. The. How the batteries impact the economic model is made clear because this is some of the. The real. Differentiate one of the other differentiators between this and traditional helicopters. Helicopters buy gas. Gas is a commodity, okay? We use energy that's stored in our batteries now to recharge our batteries. That is a commodity. You can recharge them anywhere. There'll be charging stations, conforming charging stations everywhere. But the batteries degrade over time.
- [50:18]
C
Just like a cell phone.
- [50:19]
A
Just like a cell phone. Except this is a highly regulated industry. Okay? So when our battery gets down to about 92% of the original modeled energy capacity, it needs to be replaced. There will not be an aftermarket for these batteries because of what we're talking about. They're so highly designed. 10 years billion dollars of certification to get these things approved by the FAA or the CIA or the. Or EASA.
- [50:43]
B
Okay?
- [50:44]
A
So these aircraft will last 20 years, but depending on your use case, you'll need one to two new batteries every year. And you'll have to buy that from us. That's the razor razor blade model. It doesn't exist with the helicopters. Have a different razorbaid model. It's the MRO model. When you sell an engine to. And this goes back to your. Do you want to make these things or operate them or can you do both? There's not an OEM out there that's ever operated their fleet for a reason. Right? It's a terrible model to operate. Operate a fleet, okay? What you do is you sell them the engine and then you service it for the next 20 years. That's where GE makes all their money. It's not the sale of the engine. It's servicing it because it's regulatory, required to service it every X amount of days or X amount of usage. And they do that because they're just that sort of. This is our version of the mro. There'll Be MRO for these things. But our version of it is the battery.
- [51:28]
C
And talk a little bit about the hybrid because that is something fascinating to watch. Cars too, where we still have range issues, people are struggling with that. And yet there's still some resistance on the hybrid side and so forth. So that radically changes this aircraft. If you have a hybrid, how does that work? Is there a gas engine that charges it?
- [51:47]
A
It's electric gas. You have both. Okay. When you're using gas, you can recharge your batteries. But the beauty of the hybrid is you can go far and go a thousand miles versus 100 miles. Okay, what does that open up? It obviously opens up short haul versus just little hops. Right. So you could start going from here to Pittsburgh, stuff like that. But there's a whole nother market that this opens up for us, and that's the defense market. Because these aircraft can do two things regular helicopters can't do. One, they can take off and land or fly in stealth mode, fully electric, no noise, no heat signature. That's very interesting to governments. Two, they can fly autonomously. Regular helicopters can't. There's too much pilot interaction. You need a pilot up there. Our planes can fly autonomously. So you can start. Start flying, for example, cargo from land to ship over enemy territory in stealth mode when you need it, but still get the distance that you need to deliver the mission. And if there's an accident or the plane, the aircraft is shot down, there's no human life loss. That's very interesting to governments around the world. And this is why there's a big defense application. Once you put a hybrid engine in one of these.
- [52:57]
C
And just again, a wonky question, but my understanding is one of the issue in cars is that when you have the electric system that's actually driving the car, you can't add. The only thing the gas engine can do is charge the battery. Basically, it's a different drive system for the car.
- [53:17]
B
Is it the same if I just step back and build on what Jason said? The most important thing to understand here for the listeners is I signed off the investment 18 months ago. So this isn't a wish and a prayer when you hear others talking about it. I signed this off 18 months ago. It was working less than summer. I had the CEO of a Tier 1 aerospace company come round. He was with his chief technology officer spending a day with us. And it was fascinating. I overheard at lunch saying, oh, hybrids will never work. I took him outside, pulled the covers off, fired it up, and said, no, no, this works. Already, we've already done it. Right. The hard bit is writing the control algorithm between batteries and power unit and electronic power unit on there, auxiliary power unit and that we've done all that of that. Getting those to talk to each other is the difficult bit. So we're now going to take out the engine that we had. We're going to move to a gas turbine that is going to be in our aircraft and flying next summer.
- [54:14]
C
And it's an auxiliary power.
- [54:16]
B
It is an auxiliary power.
- [54:16]
C
It's driving electricity to the same.
- [54:18]
A
We'll need less batteries and that's where the weight savings will come from. So still have batteries, but less batteries and you'll add weight with the gas. Engines are much heavier than electric engines.
- [54:27]
B
And LFI on sustainable aviation fuel as well.
- [54:31]
C
Terrific. All right. So effectively the technology is there. We are waiting for certification.
- [54:38]
A
Yeah. It's a regulatory process, It's a long process, it's an expensive process that will be the barrier to entry for those that succeed. Right. You know, and to Stuart's point, like there's plenty of room, plenty of demand for these aircraft to have multiple parties. Let's say it's Joby Archer, Beta Vertical Fort Plan players. Let's just say everybody succeeds. There's going to be a ten year and billion dollar barrier to entry for somebody else to catch up.
- [55:04]
C
And just go back to capital for a second because Stuart, you're in a position again. I've run a company. Employees are very aware of the financial situation of the company. I'm sure they're very aware of the competitors and so forth. Sounds like you have cash for next year, which is terrific, or some of next year. What do you tell everybody at the company? And so we're like, we will be raising cash. We need to hit these milestones. Why not raise the cash now? Is it due to the stock price?
- [55:29]
B
Well, I'll answer that price that one straight on. The disconnect between our stock price, our progress, our capability, our aircraft is so extraordinarily large that we do not want to raise huge amounts of capital now. It will be hugely disrespectful to the current shareholders who have put that at risk capital in the business. We are hitting every operational target. We're doing everything we said. We're gradually raising money. This company didn't raise money for three and a bit years, so we're building that track record now. We of course want to raise more money as we go forward, but we're going to do it at a price point that is appropriate. As the industry recognizes our capability and the big unlock we talked about is transition. Once you've done that, you've proved out the whole concept of the aircraft, literally, then I'm shrink wrapping it and certifying it.
- [56:18]
C
And again, looking at this from a lay perspective, is part of of it that it looks like Archer and Joby, two big US competitors, are going to be in the market next year with actual commercial aircraft? Do you think they will be and does that matter?
- [56:35]
B
I'll give you my view and then.
- [56:37]
A
Not a chance.
- [56:37]
C
Not a chance. That's a bold prediction.
- [56:39]
B
Okay.
- [56:41]
C
Not a chance.
- [56:42]
B
You could have me back on the.
- [56:43]
A
Show if I'm wrong and make fun of me.
- [56:47]
B
They will. I do not believe they will be certified by EASA or the FAA in the next 18 months. That for me is the key unlock now, getting them flying in the Middle East. Eyes on the industry. They're getting learnings that we're getting now. We have regulatory oversight now. They'll get a bit of that out there, but it doesn't get the unlock. The key unlock is FAA and easa. I genuinely believe we're at the front.
- [57:14]
A
Of the queue on that and Henry on the capital raising. This is an interesting one in that we're all marching towards certification. Maybe someone's a year ahead of the others and like, we'll see how it plays out. I'm sure they would say the opposite about them certifying next year, but every year this gets closer and closer to being a reality. Right. This was a fantasy 50 years ago with the Jetsons. It was, you know, just a bunch of ideas in people's garages 10 years ago. And here it's, it's really happening. They're flying like we're flying our air aircraft. Joby's flying their aircraft, Archer's flying their aircraft, Beta's flying their aircraft all over the world for demonstrations right now. Every year it's going to get easier and easier because the discount rate's going to come down and valuations are going to go up to Stuart's point. Like, you don't want to be Pennywise pound foolish and wait too long. We just raised close to $70 million literally like three weeks ago or a month ago. Right. So we're going to continue to raise money, but our view is our valuation today is around $700 million. Joby and Archers are trading at many, many multiples of that. I think Joby posts the Blade news is close to $15 billion. So $17 billion. Right. So what we want to do is continue to make progress, continue to show that we're doing what we said we were going to do. Stuart put out a very grand, transparent plan about our path to production last summer and we've delivered everything we've said we were going to do so far. And valuations will continue to increase as discount rates come down and we'll continue to raise money at less and less dilutive. But this, this is. There's so few players left. The scarcity value. If you want to invest in this industry, because Beta's private right now. If you want to invest in this industry right now, you have three options. Buy Joby for 17 billion, buy Archer for whatever valuation they're trading at, or buy Vertical Aerospace. And to Stuart's point, I would say we have the best aircraft or a comparable aircraft, but I think the best aircraft, we're just as far along for certification and you can buy us for 1 15th or 1 20th evaluation. And that, to me as a contrarian, is what's fascinating about the situation.
- [59:16]
C
To your point, I mean, looking at the traditional aircraft industry, there are many manufacturers, it's not a winner take all game. And I assume that the planes will have different strengths and weaknesses and so forth. All right, first of all, huge privilege and pleasure to talk to you. It's very exciting. I hope that someday there will be a personal family version of this so we actually can have flying cars and so forth. But. But before we leave any other message to the excited future flying public about.
- [59:44]
B
This future, it's real, right? This is real. We are going to be putting these in customers hands, certified in 2028. This is happening.
- [59:52]
A
This technology is going to transform the way we move around.
- [59:55]
C
Terrific, Stuart, Jason, thank you so much. Good luck.
- [59:59]
A
Thank you, Henry.
- [60:00]
B
Thank you, Henry. Great to meet you.
- [60:03]
C
Solutions is produced by Megan Kuhn Cunane. Jim Mackle is our video editor. Our theme music is by Trackademics. Nishat Kurwa is Vox Media's executive producer of podcasts. Thanks for listening to Solutions from the Vox Media Podcast network. I'm your host, Henry Blodgett. We'll see you soon.