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Audun Wickstrand Iversen

Audun Wickstrand Iversen

Audun Wickstrand Iversen is a Portfolio Manager for DNB Fund Disruptive Opportunities.

After five years as a Financial Analyst i DNB Markets, Audun joined us in 2001 as Portfolio Manager for several top-rated mutual funds. In 2007 he left the company to pursue other initiatives; started several companies and sat as a board member, chairman, and CEO in listed and unlisted companies at Oslo Stock Exchange. After rejoining us as Portfolio Manager in 2019 he is now focusing on Blue Investments and Disruptive Opportunities across global sectors.

Audun holds a MSc in Economics and Business Administration (Siviløkonom) from the Norwegian School of Business NHH. He also holds a two-year Higher Level-degree in Strategy from Norwegian School of Business NHH and a Bachelors degree from the University of Oslo.

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What would consumers say if they could get from Zurich Airport to the city center in 5 minutes during rush hour without emissions, or from JFK Airport in New York to Manhattan in 22 minutes? For the same price as a cab? They would probably say what we often hear: Keep on dreaming.

Our job is not to dream, but to analyze and invest. For us, disrupting innovative products means replacing existing products because they are cheaper and more efficient. If the estimated cost and time to get from JFK to Manhattan are right, we call that a disruptive opportunity. The big question is: Can it come true?

American Archer Aviation makes electric helicopters called eVTOL that can take off and land vertically. The company said at its 2021 "analyst day" that it would be able to travel the distance from JFK to Manhattan sometime between 2024 and 2026. An Uber X would cost $76 and take up to 70 minutes, while an Archer would cost $50 and take about 22 minutes. Today, a helicopter ride costs about 1775 USD and also takes 22 minutes. We find the same kind of numbers with most companies (Joby Aviation, Lilium, Vertical).

At Joby Aviation's 2021 analyst day, the company presented that the average flight in 2026 would be 38 km (24 miles) at a speed of 265 km/h (165 mph) at a price of $72. What makes the price so low is the rotational speed of the helicopters. In his business model, Joby assumes that each aircraft can make an average of 40 flights per day with 2.3 passengers on board (load factor) at a cost of $3 per mile. This means that each aircraft generates revenue of about $2.2 million per year and a gross profit of $1 million. In other words, the aircraft payback period is only 1.3 years. This means a fast return on investment.

Is that realistic?

The initial situation is simple. Air transport does not need roads, there are rarely queues and even small planes can fly 200 km. The price is cheaper and more efficient. A disruption in air transport?

A number of large and small companies in the U.S. (Joby, Archer, Vertical, Boing / Wisk), China (EHang), Europe (Lilium, Volocopter, Airbus), Japan (Honda) and South Korea (Hyundai) are currently working with eVTOL. Most eVTOL designs and prototypes accommodate a pilot and 4-6 passengers. The eVTOL offers three advantages:

The first is that the helicopters are very quiet. Sound tests conducted by Joby have shown that the noise when the helicopter takes off is measured at 65 dba. A blade in the wind has a sound pressure level of 20 dba and for "normal" helicopters it is 93 dba. This means that the urban airports can be built in the city center. This is more convenient for both passengers and residents of the cities. The second point is that the flight will be emission-free. The third point is the connection between the electric motor, the rotor/wing and the safety. These electric helicopters differ in design by the number of rotors and the characteristics of the wings. Multicopter (Volocopter and EHang), fixed wing (Archer, Beta, Wisk), open propeller (Joby, Vertical) and ducted fan (Lilium). A common denominator is that in the event of rotor failure, the electrically closed system prevents the aircraft from crashing.

Based on the benefits of lower costs, emissions reduction, and increased convenience, we believe there is a realistic business model for eVTOL.

How far have we come?

The test aircraft hover in the air over the USA, Europe and Asia. But before the prototypes are unleashed over our cities and airports, they must be approved by various authorities. The regulatory requirements are numerous - and strict. Approvals and permits for design, production and operation are processes that all players must go through. Joby Aviation has spent $1 billion to date on its Federal Aviation Administration (FAA) approval processes. Most companies expect to receive all approvals in 2024 and 2025. In China, however, EHang is in the process of obtaining approval for commercial flight operations. It may be as early as this summer. If approvals and financing are secured, the aircraft can go into mass production in two to three years.

What will it look like in practice?

Just as an Uber is ordered via smartphone today, an eVOTL ride will now be ordered. The meeting point is a "vertiport" - an urban airport where various drones bring and pick up people and goods. The world's first urban airport opened in Coventry in mid-May 2022 after three months of construction, as part of a city center parking lot. Inside the city airport is ticket control, baggage check, security check and a lounge as a waiting room. Then boarding takes place with up to three other passengers, and a pilot flies in a defined safety zone (drone corridor) over the city to the next destination. From the window, cars can be seen below, queuing to get in and out of the city.

Most of the planned routes are between cities (intercity) and from airports to public communication points in the city. The urban airports can be built on the ground or on rooftops (hotels, parking garages). The European company Lilium differs from the other smaller companies in its choice of design and technology. This means it is slightly larger (six passengers) and can fly longer. In their presentations to investors, they present several intercity networks. The plan is to have a European network connecting 10 German cities with Luxembourg, Salzburg, Basel and Zurich. This network is expected to operate with 190 aircraft and generate $900 million in revenue per year.

So the next time we look up in the air, we might be looking at the zero-emission highway of the future.

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