It’s all about the Money – Part 2
This article first appeared in the November 2017 edition of our free newsletter, to subscribe click here
In the last few years there has been a proliferation of unique electric vehicles and flying cars. Blue sky thinking and disruptive technology are the order of the day and I can see that there will be a number of disappointed investors ahead.
I talk to some of these projects and one I spoke to a few months ago told me something revealing. One of the principals on the project told me “It is too early in the program to start to talk to ‘aircraft’ people”.
Hmmmm – that might be a good attitude if you were not engaged in an aircraft development program. I have devised a series of assessments to judge what the likely chance of success of one of these ‘blue sky’ projects is.
- On the ‘About us’ part of a project’s website does the featured key team members include a CTO, a VP Engineering or a chief engineer? If a project dedicated to air vehicle engineering development does not include an engineer in the top echelons of their project they are likely not to succeed. With the best will in the world visionary leaders, CFOs and marketing experts are likely to go off the rails if left unchecked in an ivory tower at the head of a project.
- How many engines/rotors does the aircraft have? No civil aircraft has been certified with more than four engines (to my knowledge). No hovering civil rotorcraft has been certified with more than one lift rotor. In the wild, west of the new part 23 regulatory environment, the FAA will likely exercise more caution – as everybody generally does when faced with greater uncertainty. Trying to certify an exotic aircraft is likely to be made more difficult than it would have been in the old regulatory environment.
- Is the aircraft electric or liquid fuel powered? It is worth noting that no electric vehicle has been certified under part 23. I don’t think this is because electric aircraft are inherently less certifiable – there are advantages regarding reliability and maintenance. The drawback is that the energy density of batteries is just not comparable to oil derivatives.
If we do some simple math. We can rate the endurance of a powerplant and fuel system by the energy density of the fuel x the efficiency of the engine.
A gasoline powered piston engine:
The energy density of Kerosene = 42.8MJ/Kg, a good piston engine efficiency = 30% or 0.30.
The Abbott Aerospace power plant success index for a piston engine = 0.30 x 42.8 = 12.84
A gasoline powered turbine engine:
The energy density of Kerosene (as before) = 42.8MJ/Kg, a good turbine engine efficiency = 45% or 0.45.
The Abbott Aerospace power plant success index for a turbine engine = 0.45 x 42.8 = 19.26
A battery powered electric motor:
The energy density of rechargeable lithium metal batteries (in development, about twice the current Tesla battery energy density) = 1.8MJ/Kg, a good electric motor efficiency = 90% or 0.9.
The Abbott Aerospace power plant success index for an electric power system = 0.9 x 1.8 = 1.62
(Abbott Aerospace Power Plant Success Index)
It is worth noting that as you burn liquid fuel the aircraft gets lighter and more efficient, a battery weighs the same whether it is charged or empty. This effect has not been quantified in this mini-study.
When an electric aircraft is certified will there be a market for it considering the endurance of the aircraft is likely to be an order of magnitude less than a traditional alternative?
I love electric power systems – they are safe, very cheap to maintain, quiet and efficient. Even the performance projection for the next generation of batteries still put them an order of magnitude out.
To get back to the original point. One of these 3 points is enough to constitute a high program risk factor. If a single program has all of these characteristics my assessment is that the likelihood of failure is so close to certain that it can be regarded as certain.
…..and by failure, I mean failure to repay the financial investment in the project. It is not a success to get through certification and realize that you are selling every aircraft at a loss and the market is a fraction of what was projected at the start of the program.
Investors are free to make whatever assessments they make and invest in whatever they choose. My concern is that the extent of private equity investments in very high-risk programs is causing a lack of investment in credible programs which have a greater chance of commercial success. The failure of the programs that do receive investment is likely to hurt the credible aerospace startups as the entire sector will get a bad reputation.
Marketing mockups and GCI animations of people getting into exotic looking vehicles in their driveways and being whisked off to futuristic commercial complexes to make important decisions are just figments of someone’s imagination.
You still have to deal with the laws of physics and governmental statute, regulation and policy and they do not care what you or anyone else think the future should look like.
I hope that investors start to rub the pixie dust from their eyes and observe proper due diligence and risk assessment exercises.
I know of many part 23 programs that are credible and low risk but cannot get funded, in part because of the rush to take part in the next ‘revolution’. I only hope the investment community start to take a more rational view of the risks and benefits of the projects they have to choose from.