The future air mobility (FAM) industry—comprising new technologies and use cases such as urban air mobility enabled by electric vertical takeoff and landing (eVTOL) aircraft, drone delivery, and true zero-emission aviation powered by batteries or hydrogen and new supersonic and hypersonic aircraft—continued to gain momentum in 2022, with progress in many key areas.
Looking back on 2022
Funding continued to flow to FAM in 2022 (exhibit). The $3 billion in disclosed investments is lower than the $7 billion reported for 2021—a record year—but matched the amount of funding in 2020 and remains well above prior years, when disclosed funding never exceeded $1 billion. Publicly traded FAM players, many of which went public through a special purpose acquisition company (SPAC) process in 2021, lost 41 percent of their valuation in 2022. While this is a major correction in valuation, especially when compared to the over 20 percent decline in the S&P 500 for the year, it was less than the 62 percent decline among all SPACs.
Order volume remained on an upward trajectory last year, with approximately 6,700 orders, representing $45 billion in value. While many orders are conditional and nonbinding, the increase is still a positive sign of interest and demand. The highest-volume orders came from airlines, aircraft charter companies, and leasing companies, which placed 25 percent, 16 percent, and 14 percent of the total 2022 order quantity, respectively.
Also, in 2022 many FAM players advanced from early stages, concepts, and mockups to more tangible prototypes and manufacturing facilities. Although most are still subscale and pre-certification, Archer Aviation, BETA Technologies, Eviation, Joby Aviation, Lilium, Volocopter, Wisk Aero, ZeroAvia, and others flew prototypes in 2022. In all, the industry amassed over 6,000 cumulative flight hours of aircraft testing over the past few years, with many of these occurring in 2022. Some FAM firms have announced locations for their production facilities and started pouring concrete. In addition, a number of early vertiports were built in various locations, including Paris and Rome. Vertiport players such as Ferrovial Vertiports, Skyports Infrastructure, Urban-Air Port, UrbanV, and Volatus Infrastructure refined their concepts and laid out operating models. Drone delivery players, including companies such as Antwork, DroneUp, Flytrex, Manna Drone Delivery, Matternet, Swoop Aero, and Zipline, were also scaling up in their early test markets.
Aerospace incumbent activity in the sector also accelerated in 2022. Of the 25 largest aerospace OEMs and suppliers, 72 percent and 64 percent are now actively engaged on FAM initiatives, respectively, compared to 60 percent and 48 percent at the end of 2021. Moreover, the FAM supply chain started to come together, with 215 supply agreements or partnerships announced. The most common announced relationships were for power plants (40 percent of total volume), aerostructures (15 percent), and avionics (12 percent).
On the regulatory side, 2022 brought steady progress, with regulators in major markets continuing to engage in the industry and creating new frameworks. In the United States, for example, the Federal Aviation Administration issued proposed rules regarding beyond visual line-of-sight drones and airworthiness for two eVTOL players, and it incorporated powered-lift aircraft, including eVTOL designs, into operating regulations. The European Union Aviation Safety Agency and the Civil Aviation Authority in the United Kingdom made similar progress.
Looking ahead to 2023
A few factors are worth monitoring over the coming year.
- Players, particularly those in the eVTOL space, must largely finalize and freeze their designs to build conforming prototypes and begin the testing required to meet certification timelines for the middle of this decade. As these companies finalize their plans, they will release more detailed information on their design choices and the expected performance, including range, payload, and operating restrictions.
- To meet timelines for entry into service, both manufacturers and suppliers will have to focus on building out their production systems in 2023—for instance, by pouring concrete and installing tools and equipment. Lack of progress here would indicate that the industry is falling behind its plan. Potential increases in supplier agreements could also signal an uptick in build out.
- Drone operations may see more visible activity in 2023, given the progress made in that subsector last year. For drone delivery, over a dozen players might leverage their experience over the past years to expand geographically and pursue new use cases. Larger middle-mile cargo drones could depart on their first commercial missions.
- Industry structure will be important to track in 2023, particularly mergers and business closures. As players mature, it may become clearer what technologies, designs, and business models are likely to succeed, and a consolidation of talent and ideas will result in fewer players.
- Given the required lead time, 2023 will need to see a range of new infrastructure projects, including vertiports and facilities that support novel propulsion designs based on battery-electric charging and hydrogen, for the industry to remain on track to meet its target for operations.
- Additional funding will be important in 2023 for players to continue on this journey. This could come in direct investment in OEMs, or through partnerships in which parties such as suppliers, investors, or customers take on investment. For example, we could see investments in manufacturing facilities by manufacturing partners or through pre-delivery payments from customers.
Another big step forward for the FAM industry was taken in 2022, and 2023 will bring more developments in technology and regulation, as well as greater clarity about the industry’s direction. Companies with the best ideas and the strongest execution will likely still receive funding. In the long term, the FAM industry has the potential to revamp transportation, and we are optimistic about its future.
Axel Esqué is a partner in McKinsey’s Paris office, Tore Johnston is an expert in the Denver office, and Robin Riedel is a partner in the Bay Area office.
The authors wish to thank Saskia Boeck, Stephan Lidel, Johann Stürken, and Ann-Sophie von Gaisberg for their contributions to this article.