On a dreary November day in the Cotswolds, England, the VX4 – a cross between a plane and a helicopter – rose from an airport runway, hovered a few feet off the ground and set back down.
It might not have reached a heady altitude, but for its British owner, Vertical Aerospace, it was a crucial moment. The company, which has received millions of pounds in UK taxpayer support, is running short of cash.
Amid crunch talks with investors that could lead to the founder, Stephen Fitzpatrick, losing control of the business to a US hedge fund, the flight offered evidence that the electric craft could carry a person without needing a tether to the ground for safety.
Vertical has already had experience of what can happen if things go wrong. On a sunnier day last August, an unmanned version of the aircraft crashed into the runway after glue holding a blade on one of the eight rotors failed. The 3.7-tonne aircraft, plunged 30ft into a crumpled heap, with the blade landing 50 metres away. Nobody was injured.
The crash and the cash crunch have underlined the difficulty of making flying taxis a reality after nearly a century of efforts. Vertical announced on Tuesday that it would delay the date its first aircraft would win UK regulatory approval to fly passengers by two more years to 2028.
It had initially claimed the aircraft – 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 has chosen the UK for a factory to build 200 aircraft a year. However, cautious regulators and suppliers put paid to the ambitious timeline.
A host of startups are trying to build flying taxis, known in the industry as electric vertical takeoff and landing (Evtol) aircraft. For a few years, they appeared to be making rapid progress as investors, fuelled by cheap money, sought out the Tesla of the air.
Flying taxi companies such as the US’s Joby Aviation and Archer Aviation as well as Germany’s Volocopter raised significant sums and built flying prototypes. The three biggest plane makers – Europe’s Airbus, the US’s Boeing and Brazil’s Embraer – have been drawn into the race via subsidiaries.
Vertical took advantage of that wave. Fitzpatrick, an entrepreneur whose investments have included a Formula One team and who derives most of his £800m fortune from his energy company Ovo, founded Vertical in 2016. It floated in 2021 on the US stock market with a valuation of $2.2bn.
However, rising interest rates and development delays have given investors pause before pouring in more money. Vertical’s share price has plunged 95% since the Covid pandemic bubble, valuing it at only $110m.
A US-listed rival, Lilium, last month filed for bankruptcy for its German subsidiaries and is seeking a buyer to save it. The Chinese carmaker Geely was in talks to save Volocopter, Bloomberg reported on Wednesday, after its value also slumped. Britain’s Rolls-Royce has ended plans for a flying taxis business nearly three years after its aircraft broke the air speed record.
“There was a massive bubble,” said an industry source. “It’s starting to get to the pointy end.”
Long term, concerns remain over how flying taxis would be regulated in busy skies. But the industry received positive news as US officials issued rules on how such vehicles could be operated and pilots trained.
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Simpson told investors the company needed about $100m to cover its costs for the next year. It had £42.8m in cash at the end of September.
The immediate cash crisis could be eased if talks succeed with a big lender. Fitzpatrick and Vertical have been in discussions for nearly a year with Jason Mudrick, an American distressed-debt investor who made millions during the pandemic investing in “meme stocks” such as AMC Entertainment and GameStop.
Mudrick has offered to convert about half of his $200m in past loans to Vertical into equity, in exchange for a cash injection of up to $50m.
However, he wrote in a letter to Vertical’s board last month that he had been “denied at every turn by Mr Fitzpatrick as he refuses to accept the contractual dilution to his holdings” of about 70% of the company.
Existing shareholders would be left with only 20% of the company in the deal, although Fitzpatrick has been pushing for 30%. A deal could open the way to other investors making new equity investments. Candidates could include previous investors such as Virgin Atlantic and American Airlines, as well as Microsoft and the control systems supplier Honeywell.
While Vertical boasts of a low-cost model of buying technology off the shelf from established suppliers, it is likely to need between $500m and $1bn to get through four years without revenues.
Simpson said he was “optimistic” about finding capital, despite investors expressing concerns about the delayed launch. But a further $500m investment in Joby last month by Toyota and $300m raised by Beta Technologies has reassured some investors that flying taxi companies can still find money – if they can prove the technology works.
“This is a difficult funding environment, and there has been a shakeout in the industry,” Simpson said. “I think we’re going to be one of the winners.”