Air taxis are the trending topic in the aviation industry. Air taxi technology is already well advanced and there is a rapidly growing number of companies and investors active in this field. Experts agree that commercial use will be possible as early as 2022/2023, at least from a technological perspective. Urban Air Mobility (UAM) companies are also in demand as innovation drivers in cities. In addition to the media attention, this is also reflected in the number and type of patent applications in the context of UAM. These are found in the field of electric drives, autonomous flight technologies and 5G communication networks. At the same time, there is an international race to create a regulatory framework that could give the respective national champions a decisive competitive advantage in the battle for the global market.
For companies and investors, this means that an active exchange with the regulatory authorities will become increasingly important. In this context, it is not only important to observe the dynamic development of specifications on the domestic market, but also to monitor the relevant international markets.
The first type-certification is a decisive milestone
The country-specific certifications for electric vertical take-off and landing aircraft (eVTOL), largely correspond to the requirements for conventional aircraft. However, civil aviation authorities worldwide must adapt to consider the fundamental differences in eVTOL technology and operations compared to conventional aircraft. Type-certification is the official confirmation of the airworthiness of a specific model and is the first step for the broad market introduction of eVTOL in a country.
Many companies are currently at this stage of their business development, designing their own eVTOLs and seeking certification. The biggest hurdle and a major source of uncertainty for developers so far has been the specific type-certification requirements and regulations by the European Union Aviation Safety Agency (EASA) and the US Federal Aviation Administration (FAA).
The associated requirements are not only demanding for the designers, but also set decisive accents for the subsequent launch conditions when expanding into new markets. Many countries are guided by the FAA or EASA regulations and adopt the corresponding rules in their own regulations. Companies operating in regions where EASA or FAA regulatory regimes apply typically expand more easily into regions that follow European and US regulatory regimes than into countries that follow divergent “philosophies”.
Development and regulation proceeding at a rapid pace
The EASA has just published draft rules for the operation of air taxis in cities – the first comprehensive proposal for such regulations in the world. The new regulatory framework is open for public consultation until the end of September and covers the technical areas of airworthiness, flight operations, flight crew licensing and air traffic regulations. This provides new clarity on the certification that will emerge in Europe for novel eVTOLs and reliefs European developers from their uncertainty.
At the same time, EASA is putting the US authorities under considerable pressure. These had only recently followed the European line of defining all eVTOLs as a “special class” (14 CFR § 21.17 (b)) with the consequence that they will have to develop their own set of regulations for them. The new FAA regulation is viewed critically by the American industry which fears a loss of speed due to the necessary adjustments in the development process and the associated long phase of regulation. This could slow down American companies as well as motivate a growing number of third countries to adapt the EASA regulations, which would give European companies a decisive advantage in the critical expansion phase. Such a decision has for example already been taken by the UK Civil Aviation Authority.
Close communication between policymakers and business will be crucial for success
The rapid development and increasing complexity of the industrial environment will require even more intensive coordination with all stakeholders in the future. In addition to defining the requirements for type certification, there is also a great need for coordination with a wide range of stakeholders regarding the “license to operate”, especially regarding the use and coordination of airspace, as well as the creation of the necessary infrastructure and regular integration into local structures.
To be successful in this industry, it remains crucial to know the discourses and regulatory philosophies of the respective authorities, especially on the other side of the Atlantic. Regulators are starting to actively invite market participants to make contact and are seeking exchanges. This close exchange is likely to become a crucial dimension in the due diligence evaluation in the future and have a significant impact on market valuation. Investors interested in the UAM market will increasingly need to consider how these factors influence the future scalability of business models.
In addition, the development of electric-powered regional aircraft is already the next highly complex challenge, where industry and regulators will need to coordinate closely to sustain international competitiveness. Those who are already involved with UAM, gaining experience on how to develop in exchange with regulators, and keeping an eye on the discourses that are crucial worldwide, will certainly gain a decisive advantage in tackling future issues.
