Making sense of advanced air mobility market projections

Are drones and air taxis worth billions or trillions of dollars?

If you’ve been following the development of the advanced air mobility industry, you may have seen stratospheric numbers attached to the potential market size if air taxis become a reality and drones continue to proliferate.

The current AAM market, which is largely limited to drones for photography, recreation and limited package delivery, is around $8.1 billion, according to Fortune Business Insights. From there, predictions vary widely about the future.

At the high end, in 2020, Morgan Stanley projected that the AAM annual market would reach an eye-watering $1.5 trillion by 2040, or even a “more bullish” forecast of $2.9 trillion. On a more conservative level, NEXA Advisors identified a 20-year market value of $318 billion if the urban air mobility segment of AAM becomes widespread in 74 major cities. On an annual basis, Deloitte sees a potential $115 billion market by 2035. 

To make sense of the wide disparity in such numbers, I spoke to Robin Riedel, a partner with consulting firm McKinsey of London and New York City, who co-leads the McKinsey Center for Future Mobility.

“We’ve done over a dozen market size reports now for different clients on the AAM or UAM market, and I can tell you, we’ve had a broad range of answers purely depending on the assumptions you start with,” Riedel says.

Complicating factors in making such projections include whether they target the “total addressable market,” how that market is defined and over what time period. Most market predictions also start with a survey of people involved, so the survey targets also are relevant, he says.

In some ways, he says, predicting the AAM market potential is as challenging as predicting in the 1990s what the market potential for cellular phones would become: Most people vastly underestimated such potential, especially before smartphones emerged.

For example, Riedel believes no one really knows how electric vertical takeoff and landing aircraft, eVTOLs,  will be used if they become widely available.

“Hey, if I could take an eVTOL from Boston in New York in 20 minutes, I might just go have dinner in New York, because today I take a 20-minute cab ride to dinner,” he says. “So there’s a whole world where you just do longer trips, which you haven’t done in the past.”

The projections with the highest numbers, like Morgan Stanley’s, are envisioning all such scenarios and possibilities meeting their potential, Riedel says.

In Riedel’s view, there’s actually a lot of uncertainty given that the hurdles in front of regular air taxi service aren’t well understood and won’t be until such services are launched. One of the biggest questions is whether air taxis can overcome what he calls the “hassle factor,” meaning whether they will really be available when and where people want them.

“None of these projections take into account the difficulty in flying in Chicago in the winter or flying in Florida in the summer with daily strong storms,” Riedel says. “Most of these market products use surveys where people are overly optimistic about such problems.”

McKinsey sifts through cellphone data to learn how people travel currently and extrapolates from there based on its own surveys of aerospace professionals and others with knowledge of the AAM industry, he says. 

Staff also interview everyday people including commuters to see if they say they would purchase air taxi services. Other surveys only include professionals in the field and potential investors, he says.

“You try to explain to people how to think about the future and what air taxis might look like in the future, and ask if they would use them,” he says. “But the problem is, what people say they might do versus what they actually do is often drastically different.” 

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Making sense of advanced air mobility market projections