Americans spend an average of two hours commuting each day. This leads to increased congestion in major cities, lower productivity, more pollution, and costs cities and taxpayers money. While self-driving cars may promise to make commutes more tolerable, studies have found that without addressing the core causes of congestion (too many cars, too few roads) self-driving cars could actually contribute to the problem.
The Cost of Congestion
One solution lies in ideas that have been discussed for decades but until recently have been confined to science fiction. These include concepts like unmanned air taxis, new short haul approaches, high-speed travel, and point-to-point transportation. In short, aerospace has the potential to radically transform mobility. After talking to leaders in the aerospace industry, we found that this vision is increasingly within reach.
We spent the week at the annual gathering of corporate venture capitalists, organizations tasked with investing in transformational companies to allow their parent companies to keep pace with emerging technology. I had the chance to talk with corporate VCs from aerospace OEMs and airlines, leading global technology companies, and startups emerging to challenge the status quo. Throughout these conversations, three themes emerged on the implications of advanced mobility for the aerospace industry:
Much of the technology already exists
There will be major challenges to the current duopoly
Hurdles remain to implementing at scale
1) Much of the technology already exists
While recent competition between airlines and OEMs has revolved around marginal improvements to fuel efficiency, range, etc, there has been an explosion of development around emerging technologies promising disproportional impact on the industry. In particular, there has been a surge of investment in autonomy, hyperspectral imaging, and air traffic management. Unsurprisingly, growth in IP generation has focused on the fundamental building blocks of advanced mobility.
Already, OEMs have begun taking advantage of the emerging technology space. Examples of aerospace startups receiving corporate investment include Kittyhawk (HorizonX), a provider of drone operations SW, Aeryon Labs (Flir) a sensor provider, and Impossible Aerospace (Airbus), an electric aircraft OEM. While these early investments are an encouraging sign, we expect to see significant increases in investment, acquisitions, and partnerships as more players position to address a quickly changing aerospace market.
As investment activity increases, so too will competition for access to new technologies and start-ups.
This includes traditional aerospace companies, but also large technology companies (e.g. Amazon) with cash-rich balance sheets and traditional VCs that are able to deploy large amounts of capital as early as seed and series A rounds.
Based on our conversations with corporate VCs, the overwhelming consensus is that strategics will need to look outside of their current channels for deal flow. This means identifying technology trends and emerging companies earlier and looking outside of Silicon Valley and other innovation hubs to source deals.
At Tradespace, we’ve been working with established players and new entrants to use our predictive tools to better understand the emerging aerospace technology landscape. We can identify every company in the world with new technology in a given space and evaluate that technology to narrow down to a short list of potential partners or acquisition targets.
We believe Tradespace's technology-centric approach allows companies to find attractive opportunities earlier and cultivate a more diverse, robust partner ecosystem.
2. Advanced Mobility will reshape the aerospace landscape
Given the fierce competition between Airbus and Boeing, the two rarely see eye to eye on many issues. One thing both organizations do agree on however, is that the future of aerospace is unlikely to resemble today’s duopoly. As the advanced mobility market continues to mature, history tells us we will see challenges to the status quo from non-traditional business models, new entrants, as well as existing players.
Perhaps the easiest change to envision is the emergence of a third or fourth major OEM to challenge Boeing and Airbus. Already there is speculation that UTC’s acquisition of Rockwell Collins positions the new entity, Collins Aerospace, to develop its own short-haul platforms. Similarly, a combination of Honeywell or Safran and another tier 1 supplier could compete across the entire platform.
As new OEMs emerge, vertical integration becomes increasingly important. Competition for access to suppliers will likely inspire subsequent rounds of technology-driven M&A.
Companies with the best visibility into emerging technology that can find partners early will have a critical advantage.
Countering the effects of industry consolidation is the emergence of new companies and new business models to challenge the status quo. Historically, high capital costs of developing major platforms have limited the ability of smaller startups gain traction. Smaller vehicles for point - to - point applications (e.g., air taxis, personal vehicles) have much lower capital requirements. Advances in additive manufacturing and advanced materials lowers the costs further. This has led to the emergence of a vibrant ecosystem of small companies developing alternative solutions to current air travel models.
3. Hurdles remain to implementing at scale
While we are significantly closer to realizing many aspects of advanced mobility, significant challenges still exist. A consistent theme among large, existing players is the role of regulation in slowing development. While these regulations have led to a remarkable industry-wide safety record, they make it more difficult to experiment with new technologies, particularly in unmanned and autonomous aviation.
Fortunately, companies are finding ways to continue innovating without running afoul of US regulations. Countries like Australia have made airspace available to test new technologies. In Canada, Manitoba offers one of the largest unmanned test ranges. Start-ups need to be more proactive in pursuing these opportunities. Additionally, current OEMs can be even more proactive in partnering with emerging technology providers to flight test new equipment.
The aerospace industry has entered into a period of exciting growth and change.
Now more than ever, companies’ ability to access new technologies, develop competitive differentiators, and innovate will depend on their IP strategy.
Companies with better visibility into the IP landscape will be able to move quickly and decisively to partner with emerging technology providers. By making smarter decisions about developing and commercializing their own IP, companies can drive down costs and drive up productivity.
As the leading IP platform, Tradespace has the tools companies need to navigate the changing market and successfully ride the wave of innovation into a new era for advanced mobility.