mba Aviation provides a range of specialist aviation support services, from portfolio management software solutions to technical support to investor due diligence to airport revenue enhancement and beyond.
The team is now looking to the future of aviation, and the opportunities and challenges that advanced air mobility (‘AAM’) will generate. mba recently organised the Alternative Lift Exchange: Financing Future Technologies event alongside the Airline Economics conference in New York, providing a specialised forum for those working in and preparing for AAM to gather and share their experience.
We had questions about how and why mba is contributing to the momentum of AAM, and David kindly agreed to answer them.
1.AS: mba provides a wide range of services relating to aircraft assets and airports, from daily asset management and technical services to working with airlines and investors at the corporate level, all of which are specialisms acquired and refined over time and experience. How are you preparing now to be able to offer the same range of services and expertise to the nascent AAM industry?
DT: First, thank you for the invitation to share my thoughts in this subject area. We are extremely excited about the AAM sector and look forward to seeing the application of that technology across the various segments of the aviation industry.
The first and most obvious is providing valuation support to the industry through our opinion of value for the different asset types. Another area that we work in and is often less visible is Aviation Safety. In fact we have been working with unmanned aerial vehicles in different applications for the last few years and continue to advise clients on the integration of drone technology into their existing workflow. The applications across various industries from oil and gas to agriculture are growing and offer significant benefits over current and often more costly methods. At mba, we continue to look for ways to apply our skill set across valuation, financial forecasting, technical advisory, and aviation safety to new technologies in both development of processes and integration into existing standards.
2.AS: What are the key recurring questions that your clients are coming to you with as they prepare for AAM themselves?
DT: We are early on this process from an industry perspective, despite the pace at which the manufacturers are working and proposing entry into service which in some cases has been targeted as early as 2024.
Generally though, I think there has been a lack of clarity as to what eVTOLS are intended to be and what they are not. There appears to be limited engagement across the stakeholders in the aircraft leasing community, which is why we wanted to host the Alternative Lift Exchange, initially focusing on eVTOLs. The idea being to get all the interested parties together to ask the experts across different disciplines the questions that would be asked in the commercial space.
3.AS: mba offers investor due diligence services and various forms of financial and asset performance analysis, so you know what investors are looking for when considering deploying their capital in aviation assets. What would you say are the features of AAM and its aircraft/infrastructure assets that would be of interest to a potential financier?
DT: It is still early days in the regard. What we heard from financiers is that there needs to be an “asset to finance.” This means a couple of different things: the first is certification, which has been evolving. Most recently, the FAA moved away from Part 23 as a certification basis (the regulation governing light aircraft certification), so it is clear the regulators are not fully clear on how AAMs are treated. Before certification happens, there are a slew of other items that need to occur besides the certification basis, these include testing milestones such as vertical flight with a to-scale prototype and, ultimately, transition to level flight.
Other considerations include the operating model, which currently appears to be varied across different programs, from Joby’s all-in-one OEM/operator model to the more traditional direct delivery to operators model of Vertical. This is particularly important as it raises the question as to what the secondary market will look like, which in turn, drives the ultimate finance ability of the assets in the traditional asset-backed model. For now, it appears that the finance community will need further clarity on the above before eVTOLs are financeable using asset-backed debt.
4.AS: From the corporate and strategy perspective, what are the most important lessons learned in aviation that we can apply in AAM from day one?
DT: Part of what we must remind ourselves of is that anything new may not fit our existing parameters for how we look at the industry and conduct our business. So, when we look at eVTOLs as an asset class, we may need to consider alternatives for how they are certified, operated, and traded outside of what we are used to with commercial aircraft. While much of the infrastructure is transferable, the varied models that are being considered by OEMs and operators indicate that we will need to adapt our way of thinking along with regulators, financiers, and ultimately the flying public.
5.AS: You recently ran the first Alternative Lift Exchange event, and even when doing so under the auspices of an established provider like Airline Economics, creating a mini-conference like that is very hard work. What is it about AAM that you find compelling enough to take on this extra work, and to draw you outside of an industry in which you already have expertise and into an arena where you, like everyone else, are learning as you go?
DT: I certainly have a new appreciation for all the heavy lifting that goes into putting on an event. In this case, we were fortunate for the opportunity to partner with Airline Economics, who did much of the organizing, allowing us to focus on the content. The Alternative Lift Exchange was intended to bring interested parties together to discuss emerging technologies and identify where they integrate into the overall ecosystem. In this case, we focused on eVTOLs; however, there are certainly many more discussions to be had around the immediate and available benefits of SAF as well as other emerging technology, such as the interesting things companies like Eviation and Heart Aerospace are doing with fully electric aircraft in addition to ZeroAvia’s work with hydrogen power.
Aviation is facing scrutiny as it makes up roughly 2.5% of global emissions—similar to that of shipping—while road transport accounts for 20%+ globally, according to the EPA. Aside from generational improvements over the years, including efficiency improvements of +/-14% in current tech, there are many other positive steps being taken. While none of these may be the ultimate solution, they are incremental steps in the right direction that, when compounded, will help to achieve the net zero goals being set. At mba, we look forward to being a part of that where we can.
Thanks very much David!