Aviation Investor Insights

Key Factors:

1. Innovation: Archer’s commitment to sustainable transport solutions and its development of the Maker place it at the forefront of the eVTOL market.
2. Partnerships: Archer has formed strategic partnerships, including a major deal with United Airlines, which will potentially result in a $1 billion order, signaling strong industry confidence in Archer’s vision.
3. Regulatory Environment: The development and success of Archer’s eVTOL aircraft are contingent on regulatory approval, an area still under development within this nascent industry.

Market Overview

The projected future for these vehicles is quite promising as they offer potential solutions to reduce greenhouse gas emissions, reduce urban congestion, and provide new means of transportation that can disrupt existing paradigms.

However, a number of challenges exist in the market:

1. Regulatory Environment: Currently, regulations for eVTOLs are not fully established. Authorities such as the FAA in the United States and EASA in Europe are working on it, but it will take time before a full regulatory framework is in place. Without these elements vetted by the aviation authorities operations are left to strictly experimental flights.
2. Infrastructure: eVTOLs require a completely new set of infrastructures, including take-off and landing pads and charging facilities. Building this infrastructure will require significant investment. With plans already developed for placing landing pads near malls, government centers, and hospitals, the question of suitability will need to be defined.
3. Public Acceptance: There may be resistance from the public due to concerns about safety, noise, and privacy. With any new technology, there will always be some hesitations that may be addressed through proper education.
4. Technological Challenges: Though significant advancements have been made, there are still technical issues to be addressed, like battery life and capacity, vehicle reliability, and operating efficiency. With these technological challenges comes ensuring that the production of the equipment is financially sustainable as well for the consumer.

On the economic recovery from the pandemic, it is expected that as economies bounce back and travel restrictions ease, there will be a surge in demand for travel, including innovative solutions like eVTOLs. In addition, international agreements on reducing carbon emissions are putting pressure on all sectors, including aviation, to transition towards more sustainable solutions. In this context, eVTOLs could become a significant part of the solution by offering a form of transport that is not only innovative but also sustainable. However, the pace at which this happens will depend on how quickly the aforementioned challenges can be addressed.

Featured Stock Analysis: Archer Aviation INC ($ACHR)

May 11, 2023
Q1’23 Shareholder Letter
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Company Overview: Archer’s mission to advance the benefits of sustainable air travel has made it a key player in the emerging eVTOL market. Its current project, an all-electric aircraft called “Maker,” aims to revolutionize short-distance travel. With its focus on creating electric vertical takeoff and landing (eVTOL) aircraft for use in urban air mobility. Based on what we have seen thus far in the market here are some of the factors that we notice Archer to be performing well in:

1. Collaboration with Regulatory Authorities: Archer is closely working with regulatory authorities such as the FAA to ensure their vehicles meet safety standards and to help develop the regulatory environment.
2. Partnerships for Infrastructure Development: Archer is likely to partner with city planners, real estate developers, and other relevant stakeholders to build the necessary infrastructure for eVTOL operations. By utilizing other experts in the field they will be able to move rapidly towards the implementation of their VTOL.
3. Public Engagement: To address public concerns, Archer will need to conduct public engagement activities and demonstrations to assure people of the safety, efficiency, and benefits of eVTOLs. Having already won the approval of United Airlines with an order of 100 units, the general public will favor their product based on the relationship already present with United.

Probable Scenarios & Risk-Reward Structure:

Bullish Scenario: If Archer successfully navigates the regulatory landscape and proceeds with its aircraft’s commercial production, the company’s stock could experience significant upward movement.

Bearish Scenario: Conversely, setbacks in development, regulatory hurdles, or failure to secure additional strategic partnerships could place downward pressure on the stock.

Economic & Geopolitical Factors

Question: How do economic factors influence the development and adoption of Vertical Takeoff and Landing (VTOL) vehicles?

Answer: Economic factors play a significant role in the development and adoption of VTOL vehicles. Firstly, economic growth can fuel demand for these technologies as more prosperous societies seek out innovative, convenient, and eco-friendly transportation solutions. Second, the availability of capital is crucial for research and development, infrastructure, and operations. Thus, investment climates and economic policies can have a significant impact. In times of economic prosperity, there might be more funds available for investment in emerging technologies such as VTOLs. Conversely, in times of economic downturn, funding may be scarcer. Finally, the cost of energy and raw materials also factors in, as these directly impact the cost of manufacturing and operating VTOL vehicles.

Question: What are the geopolitical factors affecting the VTOL industry?

Answer: Geopolitical factors can significantly impact the VTOL industry in several ways. International relations and collaborations, for instance, can influence the sharing of technology and regulatory harmonization. On another note, environmental regulations and commitments such as the Paris Agreement have placed emphasis on reducing carbon emissions, driving many countries to invest in and support cleaner technologies like VTOLs. Moreover, urbanization trends, especially in fast-growing regions of the world, could lead to a demand for new transportation solutions like VTOLs to tackle traffic congestion. Lastly, geopolitical stability plays a role too, as conflict or tensions could impact the availability of resources, trade routes, and overall market stability.

Question: How are VTOLs positioned in the current global economic and geopolitical context?

Answer: The VTOL industry is well-positioned in the current global context. The increasing focus on sustainability worldwide, coupled with commitments to reduce carbon emissions, are strong drivers for the industry. Moreover, as economies recover from the COVID-19 pandemic and with potential government stimulus packages aimed at supporting green technologies, there’s an opportunity for further investment and development in the VTOL sector. However, it’s essential to remain aware that this industry is still emerging and is influenced by a complex array of factors, including regulatory developments, technological advancements, public acceptance, and the overall health of the global economy.

Expert Insights

We are starting to see a bigger push for incentives and regulatory elements to encourage more sustainable aviation practices and technology, both at international and national levels. We believe that these factors are going to push more operators and manufacturers to participate in the efforts toward more sustainable practices within aviation. Here are some examples:

• International Civil Aviation Organization (ICAO) Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA): ICAO’s CORSIA is a global market-based measure adopted by ICAO member states to offset international aviation CO2 emissions and help achieve carbon-neutral growth from 2020. Under CORSIA, airlines are required to monitor, report, and verify CO2 emissions, and offset those exceeding 2020 levels.
• Emission Trading Schemes: The European Union’s Emission Trading System (EU ETS) is a cornerstone of the EU’s policy to combat climate change and it’s a key tool for reducing greenhouse gas emissions. It operates in the cap and trade principle, where a cap is set on the total amount of certain greenhouse gases that can be emitted by installations covered by the system and this cap is reduced over time so that total emissions fall. Airlines can buy emission allowances if they exceed their cap.
• Green Aviation Research and Development Network (GARDN): In Canada, GARDN funds collaborative projects that reduce the environmental footprint of the next generation of aircraft, engines, and avionics systems in Canada.
• Fuel Taxes and Subsidies: Some countries levy taxes on aviation fuel to discourage emissions, while some offer subsidies for sustainable aviation fuel to encourage airlines to switch to greener alternatives.
• Incentives for Research and Development: Many governments provide tax breaks or grants for research and development in sustainable aviation technology. This encourages companies to innovate and develop new technologies that can reduce the environmental impact of aviation.
• Clean Sky Joint Undertaking: In Europe, the Clean Sky initiative is a public-private partnership that aims to develop cleaner and quieter aircraft. The initiative funds research and development projects aimed at improving the environmental performance of aircraft.

Educational Corner:

Visual Elements:

As Implied volatility begins to dip down and the stock price starts to push off from the previous lows, there is an increase in buyers entering the market for Archer Aviation. Having had previous levels of around $10 at IPO there is still a large variance between these two prices. As we start to see prices reach previous levels of resistance looking to see how the market responds at this current level is our next area for opportunity.

Upcoming Events & Conferences:

1. Global eVTOL Conference – May 15, 2023
2. Aviation Sustainability Summit – June 4, 2023
3. Urban Air Mobility Symposium – July 7, 2023

Ensure to mark these dates on your calendar.

Call-to-Action (CTA):

For more information on the topics discussed or to delve deeper into the world of aviation investments, reach out to our expert team. Don’t forget to subscribe to our newsletter to stay updated on the latest in the aviation investment sphere. Keep soaring, investors!

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