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Future Air Mobility Funding Down from 2021, Funding for Sustainable Aviation Shows Marked Increase

Arun Sivasankaran - : Jul 20, 2022 - : 7:40 am

Funding for future air mobility (FAM) declined in the first half of 2022 compared to 2021, but FAM industry players will continue to attract capital, according to a McKinsey report released on Tuesday at the ongoing show.

“Some may question whether FAM players will continue to attract capital,” the report, by Tore Johnston, Franz Reuel, and Robin Riedel, said. “We believe that skepticism is misplaced. True, funding has slowed on an annual basis, but that is compared to a record $6.9 billion in disclosed funding in 2021. Over the long-term, capital flows are still ahead of the pace in prior years. The short-term slowdown in funding thus far in 2022 is merely a resumption of normal growth after a big spike in 2021.”

The FAM industry is applying a portfolio approach, casting a wide net, and letting a broad range of companies pursue their own solutions, the report says. “Some will inevitably fail, and—as with the current blip in funding—that should not be taken as a signal of deeper problems. So many different concepts and designs are in development that some companies will get it right, and we will see a disruptive new mode of mobility emerge.”

One of the primary reasons for the decline in funding for FAM is the shift in momentum to the sustainable aviation segment. While sustainable aviation was responsible for just 2 per cent of funding in the first half of 2021, the figure jumped to 23 per cent in the first half of 2022 as a result of funding raised by companies such as Cranfield Aerospace Solutions and Surf Air Mobility.

Industry funding for the FAM industry now totals US $14.7 billion, a US$1.9 billion or 25% increase in the last six months. Funding was previously dominated by manned FAM at 70%; this decreased substantially to only 50% in 2022. While most early Venture Capital money in FAM was allocated to the first cohort of entrants, many gast followers may invest as markets mature and more niches emerge, the report says.

According to the report, decarbonization will drive more interest in sustainable conventional take-off and landing aircraft powered by battery electric, hybrid and hydrogen sources. The cargo delivery market could be ready to scale with potential capital influxes from small to large drone sizes, it adds.


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