Lilium Stock: An Electric Jet Aviation Company
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If you want a flying car, just put wheels on a helicopter. The man who said that commands ~70% market share for electric cars in the United States. Another comment Mr. Musk made was to imagine what a toy drone that’s 1,000 times heavier might sound like taking off from your driveway at 6:00AM. While the flying electric car might be an unrealistic way forward, what about electric airplanes?
If you take a drone and make it 1,000 times bigger so that it can carry a handful of people, isn’t that just an electric helicopter with a dozen rotors instead of one? Wrong. We’re now calling those vertical takeoff and landing (VTOL) aircraft which also describes a helicopter. And we’re back to square one. See how confusing the nomenclature can get?
What about a VTOL that uses jet engines for propulsion? You may be describing a killing machine called the Hawker Harrier. But what if this VTOL jet was powered by electricity? We’ve now arrived at the value proposition of an aviation company called Lilium.
Is Lilium a Publicly Traded Stock?
Let’s get some housekeeping out of the way first. Lilium has announced their intentions to go public using a special purpose acquisition company (SPAC) called Qell Acquisition Corp. (QELL). Until that ticker changes from QELL to LILM, Lilium is not a publicly traded stock. In September 2020, a meeting will be held to approve the merger. Once the ticker changes to LILM, you’ll know everything is kosher. Until then, there’s always a chance the reverse merger can fall through.
The Urban Air Mobility Thesis
The first time we came across Lilium was when we asked, Is Ehang IPO the Best Bet for Urban Air Mobility? As Chinese firms are getting absolutely rocked, the answer is probably no. (Nanalyze Premium subscribers were warned to avoid Chinese stocks back when we sold Ali Baba in September 2020.) The next time we looked at urban air mobility was when we looked at Archer Aviation, a company that is also planning to go public using the SPAC route. The primary difference between Archer Aviation and Lilium is that the former uses lots of spinning blades while the latter uses proper jet engines – 36 of them powered by electricity.
A few years ago we looked at 8 Electric Airplane Startups Trying to Get Off the Ground noting the following:
Large commercial hybrid or all-electric airplanes are probably more than a decade away, but it’s plausible that short-range electric airplanes may be carrying passengers on short hops around the country in just a few more years.
Credit: Nanalyze
One company that wasn’t featured in that piece, Lilium, may be making electric urban air mobility a reality in 2024.
Lilium Stock: An Electric Aviation Company
Founded in 2015, Germany’s Lilium has taken in just over $376 million in disclosed funding from investors including fund manager Baillie Gifford and Tencent, both who came in as leads. Once the SPAC merger finalizes next month, Lilium will have an additional $830 in capital which should provide enough runway for them to begin producing aircraft in 2024. The use of the word “aircraft” is appropriate considering their electric vehicle will seat six passengers in an environment that resembles a proper plane.
The plan comes together in 2024 when the company expects to produce 90 aircrafts which will automagically produce $246 million in the same year – $29 million from transporting people via regional hubs (the air taxi model) and $217 million from selling their electric airplanes to companies such as Germany’s own Lufthansa and Brazilian airline Azul which said they’ll buy 220 aircraft in 2025.
An example of what a regional electric air mobility configuration might look like can be seen below.
The pricing seems hefty but the glossy investor deck assures investors that the economics add up. All they need to do is achieve the regulatory approvals needed and start to manufacture electric jets. Strategic investors – at least once the deal closes – include Honeywell and Palantir who are both investors in the SPAC offering. There are any number of “deals” announced involving companies that plan to purchase aircraft, so we just need to wait three years and see if Lilium can actually deliver said aircraft. Plenty of competitors are also trying to accomplish the same thing, given the estimated total addressable market (TAM) for VTOL aircraft is estimated to be around $500 billion by 2040.
Should You Buy Lilium Stock?
The sample prices for riding in one of Lilium’s aircraft may seem steep until you realize just how much aviation companies charge people for more obscure travel routes such as in Pacific Island countries. There is no doubt plenty of use cases exist for a 6-seater electric aircraft that can travel at speeds of 175 mph across distances of up to 155 miles while not sounding any louder than your average dishwasher. Our questions surround implementation. Batteries need to be swapped out every four months. Each plane requires 4.5 pilots who need to be trained to fly the aircraft. Ground operations crews need to be trained how to maintain the aircraft, not to mention the need for spare parts to be manufactured and shipped to destinations as needed. Being able to produce the aircraft at scale and at an economically viable price point is just the beginning. A whole lot more needs to come together after that for planes to be generating revenue by 2024.
It sure makes life easy when you only invest in companies with meaningful revenues. The path to traction is paved with numerous problems, especially when you’re trying to develop a whole new method of transportation. As the old joke goes, do you know how to get a million dollars? Invest a billion dollars in an airline company.
Lilium has an exceptionally nice glossy SPAC deck which clearly spells out the value proposition and unit economics. A great deal can happen over the next three years, especially if you’re someone who thinks this 10-year bull market is dangerously overheated and something’s got to give. The notion of “getting in on the ground floor” isn’t compelling because there is just too much that can go wrong while we’re waiting for those first planes to start carrying passengers. Popular SPACs are beginning to fall, and some are questioning the model because it rewards everyone except the retail investor who wants to hold for the long term. We’ll check back in a few years and see if Lilium’s 2024 revenue milestone still stands.
Conclusion
Flying taxis are an appealing story for retail investors who are desperately looking for the next Tesla. On Wall Street, the idea of sustainable mobility is an easy sell to the ESG types. What’s really being sold here is the idea of what the world could look like if Lilium’s electric aircraft can be mass produced at scale and used in a manner that generates profits while reducing carbon emissions. The idea of an electric VTOL sounds great, but until then we’ll just have to stick with gas-powered VTOLs otherwise known as helicopters.
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I don’t understand what you mean by: “Each plane requires 4.5 pilots”. The plane is for 6 passengers ..
On their website they say: 6 passengers + 1 pilot.
Good question. So the idea is that you cannot have pilots flying constantly. There are rules about how often a pilot can fly. Then you need a pilot on standby in case one calls in sick. So, over a year of operation, you need to have 4.5 trained pilots. Please see below.
With respect to costs, the projections provided by Lilium management assume that Lilium’s direct costs for service operations in 2026 will be allocated approximately as follows:
– Infrastructure and ground operations: 25%
– Maintenance and spare parts (Assumes battery replacement on average every four months): 20%
– Pilot costs (Assumes one jet requires 4.5 pilots per year): 20%
– Jet depreciation cost (8-year, straight line depreciation method): 10%
– Direct tax: 10%
– Customer acquisition costs: 10%
– Energy costs: 5%
I found wiki article for Lilium: “Lilium GmbH”
In it:
Controversy
In January 2020 Aerokurier published a report which stated that Lilium could not meet its stated aircraft performance goals and would only be able to fly for two minutes at a time.[26] The anonymously-authored report was dismissed by the company but later backed up by four German aerospace academics who wrote that Lilium was “using brilliant PR to create an illusory world to attract investors.”[27][28]
In February 2021, Forbes published an article citing a number of former employees that stated the development of Lilium’s aircraft was “dogged by problems and that the flight test campaign made minimal progress.”[29]
Thank you for posting that. It’s critically important for any company trying to do something so ambitious that they demonstrate traction in the form of revenues coming from the transportation of passengers. Having an electric powered jet that can travel 155 miles carrying 7 passengers is a big bold claim. Investors should demand to see that demonstrated live as a minimum.
A quick check on LILM stock: price $1.44 versus 52 week range (1.35 – 9.07). Market cap: $433M.
Last month Lilium announced raising $119M at $1.30 per share.
Lilium Q3 results due today before market open.
We’re not touching any of this eVTOL stuff until there are actual flights happening with paying passengers.