Direct Aviation: Unlocking a New Era of Regional Mobility

Transcript

Marc Allen:All right, good afternoon. It's day 2, almost to the end of CAPA. How's everybody feeling? Woo! All right, all right, that's pretty good. So if I announce we're going to do an EL-2 demo on the stage, about to fly in, land right here, how's everybody feeling? Thanks very much for joining us last night. It was great to be able to show our, our prototype off to you and to show what this new technology is capable of. Today I'm going to be talking about the market because our focus is on the customer and it's all about how we create really practical, pragmatic value out of these new technology foundations. So I want to start with just an observation. 45 days before I was born in 1973, something happened that hasn't happened since. So this would have been May 1973. I can't see any of you because of the lights, but if anybody could imagine what it was, what has not happened since 1973 in May, shout it out. The Knicks. Close. The New York Knicks. The New York Knicks won the NBA championship. Okay? In 1994, they had a chance to go back. They didn't do it. In 1999, they went back again and they lost, I think to San Antonio that year. I was there in the front row, actually across the court from Spike Lee. Now it's an awesome story. They haven't been back for almost 30 years even to the game, and then 50-plus years even to win. And so you get to a point where you say, hey, can the Knicks ever win again? And it feels like they can't, right? Why am I telling you that? Well, we've been talking about advanced air mobility for a long time, and there are plenty of people, plenty of skeptics who are thinking advanced air mobility isn't ever going to happen. But I'm here to tell you that the Knicks can win. The Knicks can win. And advanced air mobility is here. For those of you who don't follow NBA basketball, the Knicks are in the finals starting next week. They're just waiting to see who they play. So could be the Thunder, could be San Antonio. It's going to be great. But for us today, we're going to focus on airplanes. We're going to focus on airlines. We're going to focus on customers, customers, customers. We have released yesterday the Direct Aviation Market Outlook, and I'm going to spend a little bit of time explaining the outlook as I go through the presentation. But I want to start by just asking you another question, which is, what's better than an aviation network? And what you see on the screen behind me here is the regional network. All right, we had the regional leaders up here a little bit earlier today. What you see in this map are all the existing air service routes flown on routes that are 50 to 350 nautical miles. Now compare that to the routes actually driven on the ground between 50 to 250 flown miles. So it'd be— some of those are longer trips, could be 300, could be 350 driving miles, but 250 flying miles. And this is what the map looks like on the ground, right? So the first is the network we have. The second is the network that we collectively as an air industry do not have. And what we want to talk about is a network of networks. What happens when you put those 2 together and you actually use air service to satisfy people who travel 50 to 250 nautical miles. That's what the next era of aviation is all about. That's what we're excited to be playing a part of. You know, growth in this industry can't simply be about more routes between major airports because we know the congestion problems. It can't simply be about bigger airplanes flying into those same congested hubs. But if a system that connects people from where they are to where they really want to go can be made, That's the future. And for decades, aviation has had a hard time addressing the pain that exists in this 50 to 250-mile segment. It's the pain of a trip that is too long to drive comfortably and easily, but too short to fly efficiently. And we've all had that experience of deciding not to go visit a relative, not to go do a thing for business, not to, not to, not to, because the friction of travel in 50 to 250 miles is just too much. That's, that's a very real friction that's in front of us. We want aviation to be good at connecting regions. We think it's possible. The regional mobility gap is what we call it. And when we look at the actual market, when we dive into the data, what we've discovered is that this gap is only getting wider. that the pain I was talking about a minute ago is only expanding. And yet we know that there's this huge market that we can serve. And so how are we going to serve that market? Well, we want to first start with the demand and then show you the technology and the platform that can meet the demand, and then talk about the business models that can solve for it all. So we built the Direct Aviation Market Outlook. We gathered petabytes and petabytes of data. Mahir, one of my colleagues, is here. He's our our brilliant data scientists from Caltech who has reached into your cell phones where they're pinging off of cell towers and retail spots, reached into connected cars, reached into credit card transactions. And we know every time you go between 50 and 250 nautical miles— we know actually where you go between 50 and 500, the full scope of the study. We know when you're going, how you're going, what income demographic you're in. And we've been able to use all of that data. to assess where there are customers who are willing to pay for time. These are methodologies very similar to when I was at Boeing. I was responsible for the current market outlook, and the goal was to produce a report of similar quality and integrity that would really tell the story of where the future of this industry is going. So where is it going? Well, let's start with the baseline: 35 million trips in that 0 to 500 nautical mile Distance. That is what we start off as the gate, as it would. But I'd go from the first gate to the second gate, which is the heart of the market. The heart of the market is the 0 to 250. Why 250? We call it the lav rule, right? It's the lavatory rule. If you're flying a small airplane in regional travel, you're not going to fly beyond about an hour and a half, 2 hours max, because of the lavatory. And so 250 miles becomes your marker. In that space right now, less than 1% of those trips are undertaken by air. It's not because people don't want to save time. It's not because they like sitting in traffic for hours or connecting through airports that aren't even close to their final destinations. It's just because there's no good solution. And there is no good solution in the air because 85% of those routes are more than 40 miles away from an airport. That's obviously a tremendous difference— distance, excuse me. And so to penetrate that market is, as I said, going to require platforms, models, business models that can do things that haven't been able to be done before. The problem that has to be solved is a very old problem in aviation. It's the trade-off between access and efficiency, right? We've always had helicopters which provide access And we've always had airplanes, which provided efficiency and safety. And these were 2 very different choices, and we never had something that brought them together. And what we've done is we've harnessed the reality of this new era, this hybrid-electric moment, to be able to bring together the best of both of those systems and solve that impossible trade-off. We call that the Rule of 6. It's not anything other than just real pragmatic view of what's necessary in aviation to bring access and efficiency together. You have to have access like a helicopter, but you got to have quiet because frankly people hate aviation noise in their community. You have to have payload and range, the motherhood and apple pie of aviation. You have to have affordability so this can be democratized in a real market offering, and you have to be able to provide it safely. The most important rule of aviation. If you can do all 6 of those, you win. And there has been no platform to this point that could do all 6. And yet that is, of course, what you all saw demonstrated out on the pier the other day. And it doesn't take too much imagination to walk from what you saw on the pier to a series of interesting deployments of this platform into commercial service, landing in parking lots, landing on barges, landing on piers, landing in environments that are what we call access points, ultra-short access points. Some won't be novel, they'll just be airports. And by the way, there are plenty of airports that are too small today to allow commercial service that can suddenly be used for commercial service when your airplane only needs 150 feet to land. But many will also be places that are not right now airports. There'll be rooftops that are designed for it. There'll be mountaintops next to ski lodges. And you'll see a great picture of a demonstration we did with the ski resort at Snowshoe, West Virginia, taking a 4 to 5 hour drive time trip that hundreds of thousands of visitors do every year from Washington, D.C. to the resort and turning it into 40 minutes. Okay, bottom right, we'll also do integrations into airports in ways you've never seen before, landing not on runways but on ramps and on taxiways. And we've done this, we've done this at Class Delta airports that are commercial airports like Watertown in New York and Griffiss. And we've done it demonstrating that this aircraft can integrate safely. And we now have a CRADA with the FAA to take the learnings and advance them towards Charlie and Bravo operations. As we do this, as we expand it out, of course, we can only do it because we have confidence in the airplane that's coming that can make these novel access points real. And that's our ultra-short aircraft. We call it the EL9. You've, I hope, seen it presented on the board out in front. But the key thing is that we didn't develop the EL9 and we didn't develop the Direct Aviation market outlook to create demand. We developed it to demonstrate that the demand already exists, that this airplane has a set of customers that it's ready to serve, and it's ready to serve them through these novel operations, the novel operations made possible by these access points. And it all anchors in, of course, on time savings, because the time savings are significant. You know, from here in Charleston, we could save 2 hours on a passenger's journey to Charlotte, an hour and a half down to Savannah, and even an hour just to Myrtle Beach inside the state. And when we look now in the, the DEMO, the, the, the Direct Aviation Market Outlook, and study at the macro level, we see 7 million daily trips, 7 million daily trips where we can save 1, 2, or even more than 3 hours for passengers. That gives 2,500 new routes to think about from a genuine economic viability perspective. These customers exist today, right? The data is people who are moving today. And yes, it'll be versatile. These markets will have multiple use case and forms. There'll be inner city connectors, leisure launchpads, which are really about first and last mile connectivity, airport feeders where we can feed airports, expand catchment areas for airlines, but do it in a way that doesn't congest airspace because we're not landing on runways. And we'll of course be able to answer small community service in a way that's been greatly lacking as the regional airports that you saw Michael Miller describe earlier and all those network maps have shrunk, as their footprint shrunk, as their operations have shrunk. So we go from all of those different models, and maybe just to take a minute and hover over a couple, and I'll just show you, if you think about inner city connectors, imagine Orlando to Miami. Did you know that every day we see 13,000 trips being made between those 2 points? The bulk go by car, less than a third go by air, but doesn't matter either way. The EL9 ultra-short access points can save travelers 3 hours. It's a significant, significant economic opportunity. And the Northeast Corridor is another place where demand is significant. And if you look at where, again, passengers are traveling today, some of these may be known routes to you going from New York City to Montauk. Is an environment in which we can take 75 minutes off of that trip. If you zoom out and think about it from the DC to New York area, we can leave from the parking lot at Tyson's Corner in DC, land at the helipad down on the south tip of Manhattan Island by Wall Street, and turn what today is a 4-hour door-to-door journey, however you cut it, into a 2-hour journey. So again, real demand, real passengers, existing today, measured today, that if we solve for them, allow us to create a network of networks between this new direct aviation market and the existing regional air services market. It's an opportunity that we're excited to unlock, and as the manufacturer, we know what our role is. When we size this demand, we see 12,000 to 16,000 ultra-short aircraft that will be needed to serve these markets in the 10 years after we enter service. That's 2030 to 2040. That demand obviously is significant demand. That demand ultimately is what gets us to reimagine all that is regional mobility. Hybrid electric is core to our technology. Blown lift, the ability to control an airplane at super slow speeds, is core to our technology. None of these things were possible 5 years ago. You couldn't build this system, you couldn't offer this direct aviation model with pistons, nor could you do it with turbines. It's only electric that makes possible this shift and that brings the new era of aviation forward. So are we here to tell you that the airplane solves the world? No, we're pragmatists. This requires all of the ecosystem to come together. It requires the regulators to play a role. It requires access point infrastructure partners who are building up the access points for operation. It requires customers and partners all around the scope of the industry. And of course, our suppliers who are working with us to develop our EL9 aircraft. And this isn't something we're doing alone. We're, we're super excited about the consortium of talent and partners that are coming to be a part of what we're doing. And whether it's people who are investing in us like Lockheed Martin or Safran or Honeywell, or sovereign wealth funds or retirement systems here in the US or private growth equity funds. We're excited about the capital solutions. We're excited about the supplier partnerships that are bringing the pieces of the airplane together. We're excited about the customers, the 2,200 airplanes we have in our LOI backlog and the 63 operators that make that up. And we're excited this year to be converting those into firm orders and beginning to move out with those who will be first in operation with position number 1. So the bottom line is that this is a moment. It's a real moment, and there are going to be choice points in front of a number of you and your organizations about whether or not this is an industry that you want to be a part of and that you make a choice to be an early mover on. We want to make the case for you that the market is there, the customers are there, and that ecosystem I just showed is ready to come together. We're happy to have conversations with you. A number of my colleagues are here in the room and will continue to be around for the rest of the afternoon and to share with you what we're doing with all those parts of the ecosystem that make it possible for hybrid-electric to transform all that we're doing. If this gets you even a little bit excited, don't hesitate to come talk to us. And I would also encourage you to recognize, if this gets you even a little bit excited, that everything I've described today is based on a single market. That's the US market. A single market, the U.S. market, creates that demand. But of course, this technology has global possibilities. Every winning airplane system does. And so we look forward to being able to bring this to fruition, to come forward in future CAPA events, and to share with you the updates on how we're progressing and how we're working with many of you to make that progress happen. Thank you for the opportunity. Thank you for the time. And thank you most of all for your support at the demonstration yesterday. We appreciate it. Thank you.

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