Last week, Boeing and Porsche signed a memorandum of understanding to jointly explore thepremium urban air mobility market.The word explore suggests they think premium UAM remains some ways off.Given that Porsche doesnt exactly target fleet buyers, some have speculated this partnership will produce aflying sports car.

So are Porsche and Boeing going to build personal vehicles for the high net worth crowd?If they follow the economics, this alliance will focus on creating fleet aircraft with a healthy dose of performance and luxury cues for the wealthy.

Porsche GT3 RS on display during a exotic sports car show in Mississauga, Ontario, Canada, on September 22, 2019. (Photo by Creative Touch Imaging Ltd./NurPhoto via Getty Images)

Personal vs. Fleet Sales Models

There will be a flying sports car market for individuals who wish to fly (and drive) the vehicle themselves.Terrafugia, FLUTR,AeroMobil, andPAL-V have vehicles in process targeting this market. These flying cars have list prices starting at $200,000 and can cost more than $600,000.Flying sports cars could change travel patterns to vacation homes or eventually even work in certain circumstances.They will probably represent an offshoot of the supercar market or the very top end of the car market. I cant wait to fly one, but the market in units will be relatively small for affordability reasons.Think thousands of units per year.The entire luxury car market in the U.S. will beabout $10 billion in 2019, but nearly all of that market is for cars below $150,000.In contrast, Porsche Consulting suggests the eVtol market will total$32B market, by 2035.

GENEVA, SWITZERLAND - MARCH 06: PAL-V Liberty flying car is displayed during the second press day of the 89th Geneva International Motor Show in Geneva, Switzerland on March 06, 2019. (Photo by Mustafa Yalcin/Anadolu Agency/Getty Images)

Fleet models can drive the cost to enter the UAM market much lower than the alternatives and thereby stimulate the market. Instead of paying $200,000 plus up front for a vehicle, wealthy individuals could pay a reasonable cost per trip.

However, even a fleet UAM model with high levels of utilization and seat occupancy wont immediately support massive substitution for auto traffic.Today, driving a large sedan, the type of vehicle that a black car service might use, costs around about$0.72 per vehicle mile.At an average occupancy of1.67 people (not including the driver), the cost per seat mile falls to $0.43/seat mile. (Of course, for a black car service the cost would be much higher to pay for the driver.) At Elevate this year, Uber predicted that at inception UAM cost per seat mile will exceed$5.70 per seat mile.At scale Uber projects a cost of $1.86 per seat mile for a UAM with all four seats occupied.These estimates assume the UAM programs hit their targets and dont take into account that the same technical innovations that make the decline in seat miles costs for UAM possible will also drive down the cost per seat mile of automobiles.

The superior operating economics for fleets, the high purchase costs for personal UAM vehicles and the time and effort required to get a pilots license will ensure that UAM manufacturers sell many fleet vehicles for every personal vehicle they sell.As a result, fleet vehicles should become the priority in Boeings and Porsches capital investment plans.

Market Sizing and Who Will Fly in UAM Vehicles

The fleet market for UAM vehicles will grow off the base of UAM applications that helicopters fill today and then into the black car market.After years of dormancy, the commuter helicopter business has started to grow withVoom creating a moderate success in Sao Paolo and Mexico City and Blade building a nice business in New York.Uber recently joined the fray by starting services in New York and has announced service in the Bay Area.Helicopters currently cost around $1,200 per flight hour to operate, or between $9-10 per seat mile for a six-passenger aircraft.That is 70-80% more than Ubers projections for its initial UAM service for a four-passenger aircraft (depending on whether you measure by cost per flight hour or cost per seat mile basis).Cutting that much cost could cause these markets to grow by three times or more.Most of these customers will come from more expensive car services.Uber Black, for example, typically costs over three times UberX and as UAM costs fall some black car customers will naturally choose to step up.

The Bell Nexus concept vehicle is shown at the Uber Elevate Summit June 12, 2019 in Washington, DC, one of the vertical takeoff and landing (VTOL) vehicles or flying cars that will be part of Ubers fleet for aerial ride sharing. - Uber on June 11

People often use helicopter services even though it costs more and doesnt always save time.Recently,The Drive echoed the classicNew York Times taxi helicopter race article from the 1970s using Ubers new helicopter service to go to JFK.Their case study showed that public transport took less time than Ubers service while acknowledging times might vary depending on the complexity of multi-model connections.In theBloomberg version, the rider in the helicopter spent $364 for two people and took 43 minutes to arrive despite the eight-minute flight time.In the end, the attractiveness of the service from a functional standpoint will probably depend on the time of day, which drives traffic congestion, and the proximity of the origin or destination to the helipad. However, in addition to these specific time and geographic advantages, helicopter services have also grown because they are a premium product.

The Role of Customer Experience

Today, helicopter service is a product for those with very high budgets. In the future, however, the people who will use these services might look a lot like people who buy one of Porsches more affordable sports cars.Wealthier individuals who value their time and businesspeople in a rush value premium experiences and status.Less hassle, lounges, and priority boarding remain valuable in commercial aviation even in the era of low-cost airlines, and these needs are often reflected in customer experience design for services likeBlade.

A helicopter lands on the roof of a building in downtown Sao Paulo, Brazil on June 23, 2017.Airbus' subsidiary Voom gives an alternative for those willing to avoid Sao Paulo's heavy car traffic, offering a helicopter service similar to the car

Unlike the commercial aviation market where airlines (for example Eos and Max Jet) were not able to successfully customize entire aircraft to premium segments, vehicle design will likely play an important role for fleet UAM models.On the one hand, wealthy clients will continue to find performance cues and luxury design attractive just as they do in the luxury car market. While the well-off UAM customer might not have the money for a Porsche 911 GT3 RS or a flying sports car and they may not personally fly their UAM vehicle, they will not want to fly in the UAM equivalent of a Yugo.For proof beyond cars, one only needs to look at competition in the private jet market always an aspirational area for the well-to-do.One could argue that flight speed makes little practical difference for most flights (except perhaps by increasing fuel bills), but nonetheless, it remains an important differentiating feature for private jets. Interiors also play a key role in differentiating for private aviation and Porsche Design Studio has worked in this area previously to leverage its expertise from autos. Porsche has also worked with Delta Private Jets on the ground leg of private jet trips to create seamless, premium experiences. On the other hand, fleet operators also care deeply about the cost of operation, so fleet UAM will use these cues while controlling operating costs.

While initial market sizing estimates might seem aggressive without lower costs, Boeing cant ignore the UAM fleet market.UAM will probably start from a base where it serves a relatively small core market of wealthy individuals and business people that prefer UAM service to expensive car transport options.Over a longer period, UAM will fulfill its promise as a mode of mass transportation.Whoever wins the initial premium market will have a strong, aspirational brand it can take to the mass market. Porsche represents a great starting point either as an ingredient brand to the long-term UAM brand or as a UAM brand on its won. In addition, to win this segment, the vehicle will need a luxury, status-oriented design to go with the premium services.Porsche is the perfect partner to help Boeing get there on both of these dimensions.

The rest is here:
Why Porsche And Boeing Likely Wont Make A Personal Flying Sports Car - Forbes