United Airlines' CEO Shocked the Market: Here's What It Means to eVTOL Investors

United Airlines (NASDAQ: UAL) CEO Scott Kirby disappointed the electric vertical takeoff and landing (eVTOL) market recently by pouring cold water on the idea that eVTOLs should operate in crowded airport airspace, for safety reasons. Here's what it means to the eVTOL industry.

Airlines and eVTOL company deals

It's a highly significant commentary, not least because airport trips are supposed to be easy pickings for the eVTOL industry and a way for it to quickly generate earnings and cash for investors. To be clear, it's only part of their growth prospects.

It's especially problematic for Archer Aviation (NYSE: ACHR) because United has invested in the company, and its deal with United is a key part of the stock's investment case.

Airlines have been keen to partner with eVTOL companies, as they enable them to add a service for premium customers and help reduce the overall carbon footprint of a journey. That's why American Airlines agreed to invest in the UK's Vertical Aerospace and preordered up to 250 aircraft from it. Similarly, United Airlines invested $25 million in Archer in 2021, and then an undisclosed amount in 2023, as well as making a $10 million pre-delivery payment in connection with an agreement to buy $1 billion of Archer aircraft with an option to buy another $500 million.

Delta Air Lines invested $60 million in Joby Aviation Aviation (NYSE: JOBY) in 2022 and followed that up with a $70 million exercise of warrants in early 2026. Delta and Joby also have a 2022 agreement whereby "the companies will work together to integrate a Joby-operated service into Delta's customer-facing channels." As a reminder, Joby's business model is to become a vertically integrated transportation-as-a-service company rather than an original equipment manufacturer of eVTOL, such as Archer or Vertical -- a fact that explains the difference in its deal with Delta and the other airline/eVTOL tie-ups.

What it means for eVTOL investors

Given Delta's recent investment and the lack of any change in its approach, it appears Delta remains supportive of Joby's aspirations. However, Kirby's comments throw some doubt on whether United will go ahead with its purchase of Archer's equipment.

Digging into Archer's SEC filings, we find that the United purchase agreement is conditional on Archer's "receiving certification of our aircraft by the FAA and further negotiation and reaching mutual agreement on certain material terms." It adds that "the obligations of United to consummate an order pursuant to the United Purchase Agreement will arise only after all such material terms are agreed by the parties."

Image source: Joby Aviation.

In other words, United Airlines could walk away from the deal, having only lost the $10 million as a "sunk cost" pre-delivery payment. Given Kirby's comments, that's a possibility, and it might be enough to make investors favor buying Joby over Archer if deciding between the two stocks.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.