Prediction: Archer Aviation Carries Its First Paying U.S. Passenger Before 2028

With shares down 61% from its 52-week high, it's a good time to look at Archer Aviation (NYSE:ACHR) stock. And here's an interesting angle: Its second-quarter revenue was $5 million, and none of it came from carrying passengers. Most of it came from fueling, ground handling, and leasing space at Hawthorne Airport in Los Angeles, which Archer operates. A year earlier, revenue was zero.

In other words, a market value of about $4.4 billion rests on an air taxi service that hasn't started.

My prediction: Midnight -- Archer's electric vertical takeoff and landing (eVTOL) aircraft -- carries its first paying passenger in the United States before 2028.

Image source: Archer Aviation.

Certification is in its final phase

Archer describes the FAA's route to a type certificate as a four-phase process, and it says it's now in the last one. The company announced in May that it had become the first eVTOL maker to close Phase 3. Phase 4 is where compliance with the FAA's airworthiness requirements gets demonstrated through formal testing. It's the step that ends with a type certificate.

And in July, a piloted Midnight flew a round trip between Salinas Municipal Airport and Monterey Regional Airport, each leg taking about nine minutes -- the company's first intercity flights in California.

Archer was also selected as an air taxi partner in three winning applications covering eight states under the White House's eVTOL Integration Pilot Program (eIPP).

"[W]e plan to begin flying in the Los Angeles area based out of Hawthorne Airport, and subsequently commence operations under the White House's eIPP later this year in Texas," CEO Adam Goldstein said in the company's second-quarter shareholder letter.

There's a hard date, too. Archer is the Official Air Taxi Provider of the LA28 Olympic Games in the summer of 2028, a role that would be hard to fill without passenger service running by then.

Can the money reach the date?

The bigger threat to the date is money. Archer's net loss was $263.2 million in the second quarter, up about 28% year over year and up from $217.7 million in the first quarter. Management guided to a third-quarter adjusted EBITDA loss of $170 million to $200 million, after a $177.1 million loss on that basis in the second quarter. (Adjusted EBITDA, the profit measure Archer guides on, excludes items such as stock-based compensation.) The losses are widening as flight testing, certification work, and production spending all ramp.

The balance sheet can absorb it for a while. Archer ended June with about $1.6 billion of cash and short-term investments, down about $215 million for the quarter. At that pace of cash use, the money covers about seven more quarters. That clock runs into 2028.

Of course, Archer also agreed in August to buy three subsidiaries from Boeing, paying in stock and warrants, with closing expected by year-end. Integration is rarely free, and more stock sales seem likely.

But I don't think the prediction hinges on raising more money -- the cash already on hand can carry Archer to a first paying flight.

The UAE could come first

Notably, the first fare may not be American. In May, the United Arab Emirates' aviation regulator moved Midnight into a Restricted Type Certificate program, a streamlined path that allows limited commercial operations there. Service is planned in Abu Dhabi, so Archer's first paying passenger anywhere could board overseas, possibly before the FAA finishes its work.

That's why the call is scoped to the United States. After all, a fare in Abu Dhabi would validate the aircraft. But the U.S. path runs through the FAA, and the home market is the one the investment case rests on.

The honest risk is the schedule. Archer said with its fourth-quarter report that it was targeting its first passenger-carrying flights in 2026, and a target is not a schedule -- Archer still has to fly the tests, and the FAA has to sign off.

But the call doesn't need 2026 to hold. Between management's late-2026 plans and the end of 2027 sits a year of slack.

So, will a paying passenger board a Midnight in the U.S. before 2028? I think so. Archer says it closed Phase 3 of the FAA's process before any other eVTOL company. The pilot program gives it somewhere to fly this year, and the balance sheet reaches the date without help.

The prediction and the stock are different bets, though. At about $4.4 billion, Archer is still valued on what the service could become, and the losses are widening while shareholders wait.

I'd want to see what a paying route earns before buying shares.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Boeing. The Motley Fool has a disclosure policy.