United Airlines (NASDAQ: UAL) has announced a series of sensational aircraft deals in recent months. In early June, the global airline announced an agreement to purchase at least 15 supersonic Boom Overture jets. Weeks later, United placed the largest order for commercial aircraft since the start of the COVID-19 pandemic, agreeing to purchase an additional 270 aircraft from Boeing and Airbus.
Last week, United Airlines followed through on those two previous agreements by investing in electric aircraft start-up Heart Aerospace and conditionally agreeing to purchase 100 of its ES-19 regional jets. However, investors (and air travelers) shouldn’t expect these planes to be ready by the expected entry-into-service date of 2026. Moreover, they are unlikely to experience commercial success.
The return of 19 places?
Heart Aerospace, based in Sweden, was founded in 2018 with the aim of creating an electric aircraft. It initially focused its commercial efforts on the Nordic countries, due to a strong interest in the decarbonisation of air travel in these countries.
Heart has started to develop the ES-19, a 19-seat regional aircraft that will be able to fly up to 250 miles. A few decades ago, 19-seater planes were common in the regional airline industry in the United States. Today they are almost extinct. Heart and its customers believe electric aircraft will reinvigorate this market segment by significantly reducing fuel and maintenance costs.
United Airlines and its regional partner Mesa Airlines (NASDAQ: MESA) seem to agree. United recently participated in a $ 35 million round of funding for Heart and plan to purchase 100 ES-19s “once the aircraft meets United’s safety, business and operational requirements,” Mesa being ready to operate the planes.
Despite its short range, the ES-19 could potentially operate on more than 100 current and future routes from United’s hubs, according to the airline giant. Mesa Airlines – which has also invested in Heart – added that the reduced operating costs of the ES-19 could allow it to resume flights to communities that have lost all commercial air service over the past two decades.
Heart hopes the ES-19 will be ready for commercial service by 2026. Still, that timeline seems unrealistic for a start-up developing an all-new aircraft using new propulsion technology. For example, Mitsubishi Heavy Industries – a company with decades of aerospace experience – began developing a more traditional regional jet in 2008 and has yet to achieve certification.
Additionally, electric aircraft present particular challenges for certification, primarily due to the flammability of lithium-ion batteries. Heart acknowledges that this represents its biggest obstacle to achieving ES-19 certification, but it does not guarantee that the start-up can design an aircraft that meets strict FAA safety standards within five years.
Heart Aerospace will also need to raise hundreds of millions of dollars in additional funding to complete development of the ES-19 and start production, assuming it does not go over budget.
Going electric doesn’t solve a big problem
While electric airplanes are likely to have significantly lower fuel and maintenance costs than traditional commercial airplanes, this may not make them economically viable. Growing pilot shortage could derail Heart’s concept of a 19-seat electric plane, especially in the United States
A 2017 Cowen analysis found that mandatory retirements for the top five U.S. airlines would average more than 2,500 per year from 2021 to 2026. Meanwhile, those airlines and various low-cost competitors will need to hire thousands of pilots each year to meet their needs. growth projects. Regional carriers are the No.1 pilot recruitment pipeline for major airlines – and the majors’ hiring needs for the next five years exceed the total number of regional airline pilots.
Regional airlines will have to significantly increase their salaries to replenish their ranks of pilots. (Even with an economical carrier like Frontier airlines, a second-year pilot earns over $ 100 an hour, compared to $ 38 an hour at Mesa.) This will make 19-seat planes unprofitable, especially because the ES-19 will fly at a speed 180 knot cruising speed – less than half the cruising speed. cruising speed of a regional jet – thus requiring more piloting time for a given flight.
Not ready for prime time
In the long term, decarbonising air travel will be important in tackling climate change. Aircraft manufacturers (and airlines) have to start somewhere, and Heart’s ES-19 is a decent first step.
That said, Heart Aerospace is unlikely to be able to achieve certification for the aircraft in just five years. Additionally, without strong government support, it will likely be impossible to fly the ES-19 profitably, except perhaps in a few unusual markets. Most Americans would rather drive an hour or two to a larger airport than pay extra and make a layover just to leave the airport in their hometown.
Electric aircraft technology will eventually advance to the point of being commercially viable. But United Airlines and Mesa Airlines’ vision of flying dozens, if not hundreds of 19-seater electric planes on regional routes by the end of the decade, sounds like a pipe dream.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.