Did Archer Aviation Just Enter a New Market?

Yahoo

2 days ago

Archer Aviation (NYSE: ACHR) is ramping up its production of Midnight electric vertical takeoff and landing (eVTOL) aircraft in 2025. The company is small, so the goal is to produce just 10 of the company's eVTOL aircraft. However, management is laying the foundation for long-term growth, and that process may have just taken an interesting turn in the United Kingdom.
Right now, Archer Aviation manufactures products that get tested. In fact, the company's income statement doesn't even bother including the normal section about income, because it doesn't earn any. This upstart airplane maker's income statement begins with operating expenses. That isn't unreasonable, however, because Archer Aviation is building its business from the ground up.
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Image source: Archer Aviation.
That includes the fact that the aircraft it hopes to sell have never been made before. Midnight, as the aircraft is called, is vertical lift-off and only meant to travel short distances. It is small, too, so it can't really hold many people.
The main purpose is for Midnight to act as an air taxi, ferrying customers over congested city streets. This is a new category of aircraft, and the FAA and others are only now starting to wrap their heads around the idea.
There's still a lot more testing that has to take place before Archer Aviation receives FAA approval for its eVTOL aircraft. But that hasn't stopped management from working to lay down a runway for growth once it does get approval.
For example, it has FAA clearance to operate an airline. It has FAA clearance to train pilots. And it has deals lined up to operate air taxi services in California and New York.
It is also working toward carrying its first commercial customers in Abu Dhabi later in 2025. There are less restrictive regulations in that region, and what Archer Aviation learns there will help inform its approach to building out air taxi services domestically. When the FAA finally gives Archer Aviation the nod, it will be well prepared to move forward with its business.
That said, Archer Aviation is also looking at other ways its eVTOL aircraft could be used. One that has gained more attention lately is within the military industrial complex. It has partnered with Anduril Industries from the U.K. to explore this market, with Archer Aviation providing the technology. Anduril is basically providing it with access to an industry that requires material effort to break into, given the safety and political issues involved.
There could be a huge opportunity in military applications. But the latest news release from the company included yet another little tidbit. According to the release:
Together, Anduril and its partners will explore civil and defense applications in the U.K. using Archer's Midnight eVTOL aircraft. This includes explorations for beyond visual line of sight (BVLOS) operations, enabling low-emission, rapid-response logistics to support a wide range of U.K.-focused civil and military use cases, including cargo.
The key words in there are tacked on to the end as almost an afterthought. But "including cargo" shouldn't be ignored or overlooked. A small aircraft that can take off vertically would be a great way to transport time-sensitive packages. It is easy to imagine a Midnight eVTOL aircraft carrying a heart for a life-saving transplant or secret documents for MI6.
The real benefit from this, however, is that it potentially adds another market for the company's product. And each new market being served increases the likelihood of Archer Aviation's long-term success.
The most important thing for investors to consider with Archer Aviation is risk. It is a money-losing upstart that has yet to generate any revenue. Most investors will probably want to monitor the company's progress safely from a distance. But for more aggressive investors, the company's efforts to broaden the ways in which Midnight can be used make the business more and more appealing.
Keep an eye on Abu Dhabi, which will prove out the air taxi model, but don't forget to watch all the other things management is working on, from military opportunities to simply ferrying important packages around.
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.