Archer to go public at $3.8 billion valuation, United Airlines orders $1 billion worth of eVTOL aircraft

United Airlines has formed a strategic partnership with electric air taxi developer Archer, including an equity investment and an order for $1 billion worth of the startup’s aircraft, which the company expects to certify with the Federal Aviation Administration (FAA) and begin volume manufacturing by 2023.

Archer will also merge with special purpose acquisition company (SPAC) Atlas Crest Investment Corp (NYSE: ACIC) in a deal expected to provide $1.1 billion in gross proceeds, valuing the startup at $3.8 billion post-money. The transaction is expected to close in Q2 2021 and the resulting company will be listed on the the New York Stock Exchange under the ticker ‘ACHR.’

The reverse-IPO deal will grant Archer approximately $500 million in cash held in trust along with a fully committed $600 million private investment in public equity, or PIPE. Participating investors include United Airlines, Stellantis, the venture arm of Exor, Baron Capital Group, the Federated Hermes Kaufmann Funds, Mubadala Capital, Putnam Investments, Access Industries, Ken Moelis and affiliates, and Marc Lore.

“We couldn’t be happier to be working with an established global player like United,” said Brett Adcock, co-CEO and co-founder of Archer. “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.”

United expects to acquire up to 200 of Archer’s aircraft, according to a press release. For the airline, partnering with Archer will offer a “quick, economical and low-carbon way to get to United’s hub airports and commute in dense urban environments within the next five years.” Archer expects to begin delivering aircraft in 2024.

Less than a year after exiting stealth, Archer joins the ranks of Joby Aviation and Lilium as the third eVTOL unicorn. Joby and Lilium have been building, testing, and flying numerous aircraft prototypes for at least half a decade, with Joby — the only eVTOL company known to have established a certification basis for its aircraft with the FAA — first revealing a prototype in 2011. (EHang’s market capitalization is also in the billions due to a recent climb in stock price.)

Archer has taken the fast-follower approach, building its team around key engineers from Joby and other first-movers to incorporate the expensive and hard-won lessons from other aircraft development programs with an emphasis on simplicity over maximizing performance. In the beginning of 2020, analysts at Uber Elevate tracking industry trends noticed that Archer’s hiring — mainly from Kitty Hawk, Wisk, Joby and Airbus’ Vahana demonstrator program — had driven up the average salary for eVTOL engineers across California.

The tactic clearly paid off. It has been just three years since co-founders Brett Adcock and Adam Goldstein sold their previous startup, hiring marketplace Vettery, to The Adecco Group in February 2018 for over $100 million. Now, Archer’s rapid progress and skyrocketing valuation is top of mind for Joby and other leading eVTOL developers as they compete for key partnerships and funding — potentially on the public market, with Joby rumored to be considering a SPAC deal as well at a $5 billion valuation.

Joby maintains a lead in the race to certification, however. In addition to establishing its certification basis, the company has completed more than 1,000 test flight across its current and previous full-scale prototypes. In December, Joby was awarded the first U.S. Air Force airworthiness certification for an eVTOL aircraft, paving the way for access to military testing resources and potentially lucrative government contracts.

Archer, by contrast, has yet to reveal a photo of its full-scale aircraft — let alone footage of it in transition flight. The battery-electric tiltrotor is intended to carry a pilot and four passengers up to 60 miles (plus reserves) at a cruise speed of 150 mph. Adcock told eVTOL.com in January that the company has flown the full flight envelope of the aircraft with subscale prototypes and is “deep in the certification process” with the FAA.

Joby’s aircraft promises 90 miles more range than Archer’s design, though neither figure has been demonstrated publicly. In an unproven industry dominated by flashy concept art and announcements that are light on details, progress is best judged by hard evidence alone.

Both companies have announced intent to certify, begin serial production and operate their aircraft in the 2023-24 timeframe, an aggressive goal considering the difficulty rotorcraft with novel design features have faced in their certification programs. The Bell 525 Relentless, as the first commercial fly-by-wire helicopter, has faced delays in its certification process; Leonardo’s AW609, the first production civil tiltrotor, initially flew in 2003 and has yet to receive a type certificate 18 years later.

With $1.1 billion in fresh capital — more than any other eVTOL company has raised to date — and Fiat Chrysler Automobiles (FCA) as a manufacturing and supply chain partner as well as United, Archer is well positioned to bring an aircraft to market at volume, even if the company faces some unforeseen delays in certification or manufacturing.

“For more than 100 years, history has proven that developing a successful vertical flight aircraft is hard — and no one should undertake it lightly — but access to capital has always been a limiting factor,” said Mike Hirschberg, executive director of the Vertical Flight Society. “This deal combines a world-class team and an innovative design with the resources needed to bring it to the market.”