Putting in place the complex infrastructure required for so-called advanced air mobility (AAM) operations could be the new sector's greatest challenge. That was the consensus of a diversity of speakers at the recent Electric Aircraft Symposium, hosted by the Vertical Flight Society (VFS) in Oshkosh, Wisconsin, on the eve of the AirVenture show.
Experts pointed to a plethora of potential roadblocks including the need to raise massive amounts of capital for AAM infrastructure, the complexity of folding autonomous flight into the national airspace system, and the costs associated with delivering sufficient electric power to vertiports. But what was not disputed was the tremendous financial impact AAM could have on states and local communities. And that’s key to raising the $10 to $30 billion needed to build out AAM infrastructure in the 38 largest American urban markets.
However, those funds are unlikely to be provided by the public sector, and private sector sources can’t be counted on to provide them without rock-solid demand forecasting. To be credible, that forecasting must be local and there must be more of it. Ruben Del Rosario of Crown Consulting pointed out that a study done in Ohio found that AAM could add $11.4 billion to that state's gross domestic product (GDP) by 2045, create more than 15,000 jobs, and raise $2.5 billion in tax revenue, with a big chunk of those numbers coming from cargo and emergency services operations.
Another study, this one by consultant Darrell Swanson, found a vast potential market in the UK for leisure travel on subregional flights of between five and 250 miles. Accurate, local demand forecasting is the key to raising the tens of billions of dollars required to build out AAM infrastructure, cautioned Michael Dyment, managing partner of Nexa Capital Partners.
“Every city is different," he said. "The demographics are different...You can't do a national forecast; you need to do a bottom-up, city-by-city, forecast if you're going to hope to get even close. Forecasting is a critical element of the capital raise. Without substantial billion-dollar investment in infrastructure, there is very little market for advanced mobility. That's because most cities are not ready for it. Demand forecasting is an econometric technique used to assess future revenue opportunities."
According to Dyment, an estimated $20 billion has already been invested in AAM vehicle development, and the infrastructure to support those vehicles in an operational tempo will require at least another $20 billion in the U.S. alone. And don’t look to the government for it.
“Take low-altitude air traffic control," Dyment said. "The FAA does not have it today and probably will never fund it on its own. Ground infrastructure, including modifications to airports and landing systems, that’s a very big-ticket item."
Those who think that AAM infrastructure can be developed on the cheap by adapting existing heliports and airports to the mission should think again, he counseled. Today’s heliports “are mostly located where they are not going to be annoying from the standpoint of noise, so they are not convenient when it comes to moving people. We’re going to need to talk about putting dozens of vertiports into urban and suburban areas. Cities don’t want to pay for it, nor does the federal government. The FAA is not going to be entrusted with spending $10 billion or $20 billion on this new type of infrastructure—ever. This is something that has to be driven by companies like our own.”
Raising the required funds in private capital markets will be difficult, Dyment warned the symposium attendees. “The capital is not going to come easily. It has to be raised in the financial markets. Without new infrastructure, advanced air mobility will not even come close to its economic, social, and business promise. To attract infrastructure financing from capital markets, a solid business case will need to be made for this investment that forecasts revenue, passenger demand, and ticket prices.”
At first glimpse, it is a bit of a Catch-22 situation, because “you can't really forecast passenger demand until you can get to ticket prices. You can't really get to ticket prices unless you understand the cost of the new infrastructure. So you see it's a feedback loop.”
The bottom line is that AAM needs to generate $3 in revenue for every $1 of infrastructure cost to be economically viable, Dyment said. Financing would most likely take the form of investment bonds, he noted, but he cautioned that infrastructure investors as a class “don’t want big risks.”
Dyment and his colleagues estimate it will take at least five years from an initial capital raise to get to working infrastructure in any given market. “This is not stuff you do overnight,” he told the symposium audience of mostly aircraft developers. “Just think about your own companies and how far away you are from having the ability to provide commercial services. Five years means you start paying attention to this need because this is a barrier to success. Your investors are going to want to know you're tackling this.”
Tackling “this” is no small technical feat, according to Paul Stith, associate vice president of infrastructure engineering consultancy Black and Veatch. More than anything else, AAM infrastructure comes down to electric power and the sometimes lengthy, circuitous, and expensive road to get it. The road starts with an engineering study from a utility.
“These are not inexpensive,” Stith said, noting that for a megawatt site, they can range from the tens to the hundreds of thousands of dollars. “That’s money you won’t get back from a site development,” he maintained.
As an example, Stith cited an electric car charging station big enough to host 20 megawatts and “a couple of hundred cars” in the San Francisco area. The preliminary design study fee from the utility was $30,000 and the study concluded that the cost of running power to the site was between $8 million and $40 million. A more precise cost number would require another study costing $500,000 more. And the utility would need a consulting engineering firm to get use out of the data from the studies.
Then there is the matter of zoning, which requires more design engineering study if the zoning designation of a site needs to be altered or a conditional-use permit obtained. It also requires sufficient time to solicit input from interested parties and officials.
On the power side, Stith counseled that the approval process can be accelerated and costs can sometimes be reduced via on-site battery storage and/or power generation, as well as off-peak and variable-rate charging. But on-site generation can be incredibly complicated and costly. He pointed out that on-site generation sufficient to charge just one electric car requires a solar panel array that can cover an entire acre.
Despite these rather formidable obstacles, argued Addison Ferrell, head of Americas for Skyports, the time to move forward on vertiports is now, as AAM commercial service gains momentum. While existing heliports and airports will play an important role in AAM, Ferrell pointed out that general aviation airports are often not near areas of passenger demand, such as central business districts, and may not have sufficient electrical power, nor have enough ramp space.
“FBOs that exist there currently charge quite a bit for that Gulfstream [private jet] to come and park there. And so they're not necessarily just going give up that spot,” he said. Ferrell agreed with Dyment that the prospects for public capital financed AAM infrastructure is poor. “A new and emerging industry has just a lot of risk, generally speaking, associated with it. So, [given] the political capital [required] to convince the taxpaying base that they should be funding something this risky, we don't think it would be very palatable. We think it would be a hard sell with them.”
Beyond the politics, Ferrell believes that tapping private capital will get the ball rolling faster when it comes to building out AAM infrastructure. “We think that private capital can do that more quickly and efficiently,” he said. Keeping vertiports private also allows them to control who uses them. “If you are a private facility as opposed to a public-use facility, you're able to discriminate as to who lands there. While you may still want to be open access and allow many operators to come land, you also can say that some training pilot or an aircraft that's really loud can't land, which the community will actually appreciate.”
Ferrell faulted some members of the AAM community for proposing what he characterized as grandiose, rooftop vertiports that may not reflect what is likely economically sustainable or palatable from political or safety perspectives. “We need to get closer to something that's more grounded in reality, that resembles something that has some familiarity within aviation," he said. You need to look at both airspace and constructability at a very minimum for a starting point. Consider the constraints on where the site can be or can't be, like right under the runway [approach] at LAX [Los Angeles International Airport] as an example. Also, look at what types of designs would be [acceptable to] the building and safety departments and the fire marshal.”
While the FAA is in the process of developing a vertiport advisory circular, Ferrell said, the industry need not wait for it before proceeding with design and construction. “We don't expect the FAA to certify vertiports in the same way that they explicitly exempt heliports from certification," he explained. "Secondly, it's going to be the guidance that the FAA will be making, not rules per se, that's the nature of an advisory circular. We have some existing design guidance in place. We have the existing heliport AC, which is a fantastic starting point. Lastly, infrastructure development is a long-lead-time effort. So we believe it would be foolish to wait until everything is fully baked to start on it.”
In the end, money is still the big question mark. “The infrastructure is not there yet,” said Dyment. “The cost of that infrastructure is not well known."