The future air mobility (FAM) Industry is growing, with 16,000 orders placed for novel aircraft and propulsion systems, $15.8 billion in disclosed funding in the last ten years, and new investments and orders continuing to flow in. Although startup manufacturers have garnered much attention, incumbent original equipment manufacturers (OEMs) have assumed an increasingly active role in recent years. While most major aerospace OEMs have researched innovations and future concepts including novel propulsion, unusual aircraft configurations, and autonomy for decades, they only began more formal programs on these topics recently. Aerospace suppliers have also become more active in FAM over the past few years.
Given these developments, we analyzed the FAM efforts of the largest established aerospace OEMs and suppliers to gain more clarity about their current activity. Our results show that 72 percent of the largest 25 aircraft OEMs and 64 percent of the largest 25 suppliers now engage in some type of FAM activity, ranging from exploratory partnerships to active supply agreements (exhibit). Among OEMs, initial publicly disclosed efforts began in 2016, and the share of active players has steadily increased by about 10 percentage points each year since 2018. Suppliers entered the market nearly two years later than OEMs, on average, but quickly expanded their presence in 2021, when the percentage of active players jumped 20 percentage points to 50 percent.1
Of note in the analysis is the relative engagement in the FAM industry by OEMs and suppliers. In our data, 24 percent of suppliers were classified as being “engaged” or having an even higher FAM maturity level, compared to 16 percent of OEMs.2 The higher maturity among suppliers may occur because the investment required to develop systems or components is less than that required for an entire aircraft. In addition, suppliers may be spreading their efforts across multiple customers, whereas OEMs are more likely to focus on just one or two aircraft designs.
Although many challenges remain and success is not certain—as is the case with any new industry—there are a few reasons that OEMs and suppliers are pushing ahead, despite the recent drop in the stock market and growing risk aversion among investors, especially for long-term projects.
FAM represents a strategic technology investment in aviation. Future air mobility programs are advancing technology in terms of novel propulsion and autonomy, which can make all new aircraft more affordable and easier to use across a wide set of use cases, including established commercial segments. For example, future commercial aircraft could use technologies that were first deployed on smaller conventional or vertical take-off and landing (VTOL) aircraft.
Shareholders are expressing interest. In the most recent year of investor earnings calls for all public companies, future air mobility was mentioned 1,000 times—a 60 percent increase over the same period five years ago. The main reason is the value at stake. Market estimates for regional and urban air mobility, along with new propulsion sources and autonomy, are projected to reach hundreds of billions of dollars once the market matures. Because of that growth potential, shareholders are asking company leaders to make at least a few small bets in this emerging industry, whether through corporate investments, program launches, new business divisions, the acquisition of innovative companies, or partnerships. The acquisition of these technologies can help existing business lines and bring in high-caliber talent.
Future air mobility is an important part of the industry’s decarbonization path. The aerospace industry is pursuing a set of levers for decarbonization. FAM technology—particularly true-zero propulsion technologies such as battery-electric or hydrogen powertrains used in FAM designs—is one such critical lever.
The increasing engagement of incumbents in the FAM industry can help accelerate developing new technologies, inspire the next generation of aviators and engineers, and provide meaningful economic benefits. Each incumbent may have different motivations for entering the FAM market. Collectively, however, they bring additional momentum, capabilities, and experience to a rapidly evolving segment.
Tore Johnston is a knowledge expert in McKinsey’s Denver office, and Robin Riedel is a partner in the San Francisco office.
1 Market entry was defined as the point at which 25 percent of the top 15 OEMs or suppliers became active in the FAM industry. OEMs reached this point in the first quarter of 2019, with suppliers following in the third quarter of 2020.
2 OEMs and suppliers that were classified as engaged in FAM had three or more points on a scale that assigned the following values: two points for an aircraft program; one point for a demonstrator, concept, investment, or product; 0.5 points for a supply deal; and 0.25 points for a partnership.