In pandemic-ridden 2020, United Airlines recorded over $7 billion in losses, the largest in 15 years, and sees a long road to recovery as the COVID-19 crisis wears on. Seeing no sign of a quick rebound in passenger revenue anytime soon, the embattled carrier is raising bets on new ventures, looking for opportunities in the nascent urban air mobility market, a sector Morgan Stanley estimates to be worth $1.5 trillion by 2040.
United announced Wednesday that it has placed a $1 billion pre-order for electric vertical-takeoff-and-landing (eVTOL) aircraft made by Silicon Valley startup Archer Aviation, with the option to buy an additional $500 million worth of aircraft.
Archer, a two-year-old startup headquartered in Palo Alto, Calif., is developing electric planes at a facility near Palo Alto Airport. The company plans to unveil a prototype that can fly 60 miles at a speed of 150 mph later this year and begin volume production in 2023, the year United expects to turn a profit again.
“We couldn’t be happier to be working with an established partner like United,” Archer co-CEO Brett Adcock said in a statement. “This deal represents so much more than just a commercial agreement for our aircraft, but rather the start of a relationship that we believe will accelerate our timeline to market as a result of United’s strategic guidance around FAA certification, operations and maintenance.”
Also on Wednesday, Archer announced a merger agreement with the special purpose acquisition company (SPAC) Atlas Crest Investment Corp. that will take the startup public in a deal worth $3.8 billion. The combined company will be named “Archer” and listed on the New York Stock Exchange under the ticker symbol “ACHR.”
Archer plans to deploy its eVTOL planes first in Los Angeles. United estimates that using an Archer aircraft could reduce carbon dioxide emissions by up to 50 percent per passenger on a trip between Hollywood and Los Angeles International Airport.
“Part of how United will combat global warming is by embracing emerging technologies that decarbonize air travel,” United CEO Scott Kirby said in a statement. “By working with Archer, United is showing the aviation industry that now is the time to embrace cleaner, more efficient modes of transportation.”
In the fourth quarter of 2020, United burned through an average $33 million a day, including severance and principal payments. The airline expects revenue to fall up to 70 percent in the first quarter of 2021 compared with the same period in 2019. Nevertheless, it was able to maintain a healthy cash position by the end of 2020, with nearly $20 billion on hand, thanks to funds available under the CARES Act loan program.