Taking stock of the rapidly growing future air mobility order backlog

The first nine months of 2021 saw a huge volume of activity for future air mobility (FAM) manufacturers. Orders and options for more than 5,800 aircraft were placed between January and early October, totaling $20.2 billion. That far outpaces the volume for conventional aircraft during the same time period (554 orders and options total, or 10 percent the volume of FAM). Before manufacturers pop the Champagne, however, they should consider some historical precedents. In past periods of disruptive innovation in the industry—such as the advent of supersonic aircraft and the early days of the very light jet—many early orders and options were never filled.

Orders for future air mobility have soared in 2021, based on data through October 5.

Drilling down into the numbers, airlines have been the biggest buyers thus far, comprising 29 percent of demand volume (including orders and options) and 46 percent of the total value. Aircraft leasing companies are another large segment, with 13 percent of the total volume and 11 percent of the total value. Notably, some manufacturers plan to operate the aircraft themselves; those aircraft would not be reflected in the current numbers.

In terms of propulsion technology, 88 percent of all orders and options are for battery-electric aircraft. Following this are hybrid aircraft (8 percent), typically for longer range missions. Less common are hydrogen powered aircraft (4 percent), and finally traditional combustion (0.3 percent).

Most early orders and options (79 percent) are mainly configured for vertical take off and landing (VTOL). This pairs well with battery powered drivetrains and the design space that distributed electric propulsion opens up. The balance of orders are conventional take off and landing (CTOL), with 11 percent of volume, and short take off and landing (STOL), with the remaining 10 percent.

In terms of geographic markets, customers are distributed between Europe, the Americas, and Asia Pacific. Suppliers in Europe received the majority of 2021 orders and options (55 percent), and customers from the Americas have placed the largest share of aircraft orders (39 percent).

To be clear, large demand volume is a positive for the industry. Orders and options serve as an important signal of demand to manufacturers and suppliers, and they give companies valuable credibility in the eyes of investors. Yet this demand is not ironclad.

Of the $20.2 billion in total FAM demand this year, about $4.8 billion are options, which buyers can walk away from with no financial or legal consequence. (They simply don’t exercise the option to buy.) The remaining $15.4 billion (approximately 75 percent) are traditional orders, but these are also far from certain. Many of these are non-binding and have a broad range of requirements attached to them to become binding. Furthermore, almost none have any kind of down payment associated with them.

To put the current situation in perspective, we looked at a few other disruptive segments in aviation: supersonic aircraft in the 1970s and very light jets during the global financial crisis. When the supersonic Concorde was in development, 18 airlines placed options or orders for roughly 100 aircraft, yet more than 80 percent of those were never delivered. The causes for customer cancellations ranged from operating cost concerns, to environmental and noise concerns, to an industry-wide push for larger aircraft at the time. Furthermore, another supersonic program was cancelled in its entirety, despite many order options from multiple airlines.

In the very light business jet segment, nearly 3,000 orders were cancelled from 2008 to 2010, with approximately 2,200 of these for the Eclipse 400/500. Eclipse faced Chapter 11 bankruptcy in 2008 and cancelled the aircraft project.

The bottom line: A fast build-up of demand is an encouraging sign. But the only metric that truly matters will be final delivery of certified aircraft.

Olivier Chéret is an associate partner in McKinsey’s Montreal office.; Jobarre Hammond and Tore Johnston are consultants in the Boston office; and Robin Riedel is a partner in the San Francisco office.

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