What happened
Electric plane start-up Archer Aviation (ACHR +2.50%) has hired a former Federal Aviation Administration (FAA) administrator as its chief safety officer. Investors are excited about the credibility the hiring will add, sending shares of Archer up about 20% in Tuesday trading.
So what
Archer is one of several companies racing to develop electric aircraft capable of vertical takeoffs and landings, or eVTOLs. These so-called "flying taxis" aren't big enough to replace commercial aircraft, but could play a valuable role flying over city traffic jams or connecting city airports to nearby suburbs.
It is an intriguing technology with a substantial potential addressable market, but also one with considerable competition. Archer is racing to get a product to market against other start-ups, including Joby Aviation, Lilium, and Vertical Aerospace, as well as big-pocketed aerospace companies including Boeing, Textron, and Embraer.
With so much competition, the first few companies to get their designs through the FAA should have a clear advantage. On Tuesday, Archer announced the appointment of former acting FAA administrator Billy Nolen as chief safety officer to help the company navigate that process.
NYSE: ACHR
Key Data Points
Now what
It would be wrong to imply that having a former FAA heavyweight on board will somehow help Archer game the regulatory approval system. The FAA has a clear set of guidelines it will follow, and the designs submitted by Archer and others will only be cleared if and when they hit the requirements. However, having someone in house who is deeply familiar with the FAA and its operations can help as Archer works to make sure it fulfills the requirements.
Investors have every reason to be excited about the potential but need to be careful not to get ahead of themselves. The eVTOL space still carries a lot of risk, and given the number of competitors, it is not clear that every company will be a success. At best, there is still a long, difficult path ahead before approval will be granted.
Therefore, Archer and other eVTOL companies should be kept as a small part of a well-diversified portfolio.
