Archer Aviation (ACHR -1.11%) is trying to revolutionize the way we think about travel. When you find out that it is building aircraft, you might think that the above statement sounds a bit bold. How could the company revolutionize airplanes? Well, by making them much, much smaller. Here's what you need to know and why Archer Aviation could be a millionaire maker if it succeeds.
What does Archer Aviation do?
Right now, Archer Aviation doesn't really do much of anything except lose money. That, however, is understandable because it is building its aviation business from the ground up. That's a slow and costly effort. In fact, it is likely that Archer Aviation will continue to lose money for a while longer. Risk-averse investors probably won't be interested in this stock.
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That said, Archer Aviation isn't building the type of aircraft you are used to seeing. It has designed a small vertical-lift aircraft -- known as an eVTOL -- that looks a bit as if it came out of a science fiction movie. Its idea is to make air taxis. Instead of driving into a congested city, only to sit in traffic for hours, you could simply fly over the traffic. It would represent a sea change in the way people think about air travel, which has historically only been used for longer distances.
Can Archer Aviation do it?
Archer Aviation already has an aircraft in testing. So its air taxis do fly. However, building a business around them is another matter. But it is one that will likely be proven out in 2025 or early 2026. There are a few reasons for this.
First off, Archer Aviation is starting to ramp up its production. It plans to build around 10 of its Midnight aircraft in 2025. Most will go toward testing so it can get U.S. regulatory approval for the commercial use of the aircraft. Getting FAA approval is likely to be the big leap forward for Archer Aviation as a business. It still has a long way to go on that front.
However, it is also working with partners in countries where regulations aren't as strict. Right now, it is working to set up an air taxi service in Abu Dhabi that could carry its first commercial customers in 2025. And it has already inked an agreement with an Ethiopian partner to set up a second air taxi service in the future. Abu Dhabi is the big test for the concept; if it goes well, there could be a very bright future for Archer Aviation.
While all of this has been going on, Archer Aviation has been laying the groundwork for a quick liftoff in the United States. It has the approvals needed to operate as an airline and to train pilots. It has plans in place to create air taxi services in key U.S. markets like California and New York. And with the knowledge it gleans from setting up operations in Abu Dhabi and other foreign markets, it should hit the ground running once it gets the nod from the FAA for the commercial use of the Midnight aircraft in the U.S. market.
There's huge opportunity here, if you can accept the risks
This might be a huge opportunity, if everything goes as well as Archer hopes with production plans, FAA approval, and the air taxi service it is hoping to operate in Abu Dhabi. But there are a lot of moving parts here, and if one fails, the whole story could fall apart. In other words, Archer Aviation could be a millionaire-maker stock, but it probably isn't the type of stock you want to bet the house on.
