Is it a bird? Is it a plane? A super-sized drone that can carry humans? Or an air taxi like a Flying Uber? No longer just a pie-in-the-sky, the thing you will soon be able to see taking off from vertiports in city centres such as New York, Los Angeles and Chicago is all that and more.

Commercial air taxi service could begin in early 2025 if all the regulatory permissions are forthcoming. Manufacturing of electric vertical take-off and landing (eVTOLs) for non-commercial use, like the US Air Force, is likely to begin later this year.

In the 1985 science fiction movie Back To The Future, the protagonist Marty McFly says to the scientist Dr Emmett Brown: “Hey Doc, you better back up. We don’t have enough road to get up to 88.” Brown shrugs and responds: “Roads? Where we’re going, we don’t need roads.”

What was sci-fi 38 years ago is ready for prime-time reality. With a range of up to 150 miles (241km) and a top speed of 200 mph, eVTOLs — which can transport four passengers and a pilot— are seeking to help reduce urban congestion and accelerate the shift to more sustainable transit modes. How can they fly from busy city centres without long runways? eVTOLs do vertical take-off and landing, which is possible through electrification of the lift and thrust provided by automated controls.

Investors are starting to pay attention. Joby Aviation, Archer Aviation, Eve Air Mobility, and its peers have been on a tear over the past month. Joby’s shares, trading for just over US$3 ($3.98) a share until late April, began their upward crawl two months ago. Earlier this month, Joby touched a record US$11.98 a share though they have corrected a bit since.

The catalyst for Joby’s rocket-like surge? Last month, the eVTOL pioneer received a special air-worthiness certificate from the US Federal Aviation Administration (FAA) for its first aircraft built at its pilot production line. The smaller, quieter, easy-to-fly eVTOL aircraft are sometimes erroneously called ‘flying cars’ even though Joby is building a vehicle for short commuting flights that can be used as air taxis — flying people to airports or nearby resorts above the ground traffic.

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Joby was listed on the New York Stock Exchange through a merger with a special purpose acquisition company (spac) in August 2021. The IPO was priced at US$10.20 a share, but like many other unprofitable tech start-ups that listed through reverse mergers with cash-rich shell firms during the pandemic, Joby saw its stock plummet over 70%.

Sceptics laughed at air taxis being airborne anytime soon. They were lumped in with Meme stocks. Many wondered why stocks of Joby and its peers weren’t down 80% or 90% as the US Federal Reserve continued to raise interest rates from near zero to 5.25%. The Fed is expected to hike again on July 26, bringing its benchmark Fed Funds rate to 5.5%.

Now it is the makers of eVTOLs that are smiling. The FAA approval, which advances the timeline for air taxis to take-off within the next 20 months or so, has dramatically changed the narrative for that small segment of tech stocks. Air taxis are seen as enablers for Urban Aerial Mobility (UAM) aircraft. The innovation drivers in congested global cities like New York are now poised to deliver their first aircraft as soon as next year with limited commercial services starting in the first half of  2025, Austin Moeller, an analyst for Canaccord Genuity, a growth companies-focused investment bank, told me in a recent interview.

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Soaring high Banking giant JP Morgan recently estimated that the total addressable market (TAM) of eVTOLs could potentially top US$1 trillion by 2040, including only passenger transportation. In a report earlier this year, the bank said it would jump to up to US$3 trillion if cargo and military operations segments were also included. “We don’t think investors are prepared for the scope of this revolution,” Morgan Stanley noted in a report on the eVTOL industry last year. “However, the investment cautioned that investors need to consider “a host of regulatory factors that may slow adoption” of Urban Air Mobility services. Morgan Stanley projects a total addressable market of US$9 trillion by 2050.

The eVTOLs were seen as a long gestation technology that can take years before it breaks even. Higher for longer interest rates do not impede their take-off. For starters, most listed players raised money during the 2021 IPO heyday. Joby, for example, has US$1 billion cash on hand. Archer has US$440 million cash. Though they still need to spend a fair bit on R&D and capital expenditure, most manufacturers intend to sell their planes to operators.

As soon as the aircraft is close to certification, the manufacturers will sell them so the operators pre-pay their costs. They are not going to one stuck with an inventory of planes on the tarmac waiting for buyers. The business model is similar to commercial plane makers Boeing and Airbus, which make aircraft as the orders come in. Only Joby has a unique business model, making and operating its air taxis like Tesla plans to do with self-driving Robotaxis.

Who would buy aircraft made by Archer, Eve Air Mobility, Lilium Air Mobility and  Vertical Aerospace? Archer, backed by United Airlines, already has an order backlog of 300 aircraft. While Eve, a listed subsidiary of Brazil’s Embraer, the third-largest aircraft manufacturer behind Boeing and Airbus, has a backlog of 2,850 aircraft worth over US$8 billion. Joby will roll out its first aircraft next year, Archer’s roll out of eVTOLs is expected in late 2025 for the 2026 launch, and Eve expects to present its first aircraft in early 2026. Joby has partnered with Uber Technologies and Delta Air Lines to launch its own air taxi service. Uber sold its Elevate aerial ride-sharing business to Joby in 2020 and invested another US$125 million in the eVTOL pioneer. Uber’s software tools enabling on-demand mobility will be at the heart of Joby’s air taxi service.

Once Joby is up and running in New York, Los Angeles, or Chicago, you can open up your Uber app and hail one of its air taxis. If you are far from a vertiport or a heliport in New York or Los Angeles, you can hail a car that will take you there and then hop on a Joby eVTOL, flying you to the airport in less than 10 minutes. And, oh, you will get billed one fare that combines on-ground Uber and in-air Joby.

Joby-ing your way out of gridlock Billionaires or CEOs of large companies pay a ton of money to take a helicopter to airports or the playgrounds for the wealthy like the Hamptons or Martha’s Vineyard or Nantucket from their perch in New York, but a busy run-of-the-mill company executive or indeed most middle-class people are still forced to bear an hour or much longer taxi ride. Blade runs a helicopter service from Manhattan to New York’s John F. Kennedy International Airport and charges between US$195 and US$300 for a seat on its regular flights. You have to pay more to fly instantly. “eVTOLs just make quick air rides in cities much more affordable,” says the Canaccord analyst. “Any mass market eVTOL service has to be competitive with Uber and Lyft because that’s what you are looking to disrupt.”

From midtown Manhattan to John F. Kennedy International Airport, if you hail a cab at 4pm, it could cost you US$100, or even up to US$150 if the traffic or the weather is particularly bad with Uber or Lyft surge pricing.

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Moeller believes a short trip on an Uber to a vertiport connecting with an eVTOL to John F. Kennedy International Airport would cost about US$110 to US$120. He argues that Joby and its eVTOL peers can deliver fairly close to that price point. A US$200 or US$300 helicopter ride to John F. Kennedy International Airport is too expensive to be a mass market service. Even if you are riding off-peak, say 11 am, to John F. Kennedy International Airport from Midtown Manhattan, an Uber or Lyft might cost US$70 to US$80. So, US$110 is the sweet spot or what you might pay for Uber during peak hours. You would fly a Joby because you’ll be at the airport in 10 minutes instead of grinding in excruciating traffic for an hour.

Future of flight What do eVTOL economics look like? Archer planes are likely to cost US$4.5 million each. Longer-term Archer is hoping to produce about 200 eVTOLs a year. Helicopter makers like Sikorsky or Textron, which owns Bell, make 150 to 200 units in a good year. It will be a few years before Archer gets to scale, but it is building capacity, and there is likely to be enough demand for eVTOLs in the first decade for all the manufacturers to sell whatever they can make.

The eVTOLs use the same lithium-ion battery packs inside the electric vehicles on the US, Europe or China streets. Moeller believes Archer could become free cash flow positive in 2028, Joby will be free cash flow positive by 2029, and it could have gross margins close to 40% in its seventh year of operation. In contrast, Uber, now in its 12th year of operation, had gross margins of around 40% in its January to March 2023 quarter.

Joby’s business model is to make its own eVTOL aircraft and offer an Uber-like service. The firm will first deliver aircraft to the US Air Force early next so that it can fly troops on it as soon as the FAA certifies its planes next year. Commercial service for Joby or its air taxi service will likely begin in the first half of 2025.

What might hold back the rise and rise of air taxis? There is sufficient infrastructure in places like Manhattan. Blade helicopters already use three New York City-owned vertiports. New York has other designated vertiports and is building more.

However, regulatory issues must be resolved before air taxis soar above Manhattan’s skyscrapers. Among them are the battery reserve margin and pilot training requirements. The FAA says aircraft should have a battery reserve of at least 30 minutes plus whatever it would take to fly. So for a 10-minute flight to John F. Kennedy International Airport, you need about 40 minutes of battery reserve.

The reserve battery regulations are a hold over how much fuel helicopters or seaplanes need to fly. eVTOL makers believe 15 minutes of battery reserve is fine, but they may have to compromise to 20 minutes of reserve. Pilot training is another issue. The FAA requires pilots to have 1,500 flight hours before they fly an eVTOL. Forcing an eVTOL pilot to have 1,500 hours on a larger plane might be asking too much. The FAA might need to tweak rules allowing pilots with 1,500 hours in a helicopter or a light plane to qualify to fly the new eVTOL.

The US government and legislature are backing eVTOLs. Last October, US Congress passed a law that mandates everything from regulatory infrastructure and air traffic management be ready as soon as aircraft are certified. US President Joe Biden’s Administration sees eVTOLs as a key part of its clean energy policy. eVTOL aircraft have the potential to substantially reduce carbon emissions in major urban areas and break up traffic congestion by taking to the air. They are emission-free, emit zero noise, safe, affordable, small, precise, fast, quiet, adaptable with most weather conditions, and easy to use and maintain.

It will be a while before eVTOLs are regularly sighted over cities like Singapore because it is still cheaper to take a cab, but as battery technology improves, enabling them to fly longer distances and aircraft prices fall, they will be common in the Asian metropolises too.

Assif Shameen is a technology and business writer based in North America

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