Consultant: Time Could Be Running Out For Big-Buck Investment Cash Flow

There are plenty who are fed up with startup aviation businesses that, despite clearly impractical ideas, seem to raise a lot of investment capital. A recent article in Forbes might bring a breath of fresh air. Veteran aviation consultant Brian Foley projects that the times may be a changin’ for marginal ideas sucking up investment cash that could be going to more worthwhile projects. The title of his article sums it up: “For Many Early-Stage Aviation Companies, The Jig Is Up.”

Foley does an excellent job of explaining how financial backers can be sucked into dead-end ideas, and how that bad taste can deter them from future support for ideas that have real-world, long-term promise. He cites the 2008 bankruptcy of Eclipse Aviation (since morphed into Eclipse Aerospace), which “soured investors to the general aviation segment after it vaporized more than a billion dollars in investment. For over a decade, wary, early-stage investors largely shunned the general aviation sector altogether.”

In describing some of the basics of how investment capital is flashed around, the article identifies how futuristic-looking aviation concepts can be “shiny things” to short-attention-span investors awash with cash, but not so rich in reality checks. Foley wrote, “Some newcomers were naïve to the aviation sector’s high level of compliance and capital-intensive nature. They hopefully relearned that returns can take upwards of a decade to appear and must be viewed on a long-term investment horizon rather than the typical a 2–5-year flip.”

Changing economic factors such as rising interest rates are giving investors financial options that now make diving into aviation long shots less attractive. Losses associated with the failure of Aerion’s supersonic program and the recent shuttering of Google co-founder Larry Page’s Kittyhawk eVTOL company should serve as “the canary in the coal mine” for other investors, Foley said.

After predicting who among the investment community will be the winners and losers as the changes play out, Foley concludes with, “The less obvious and most unfortunate loser will be the general aviation industry itself. Hopeful game-changing ideas could now be stifled for years to come as investors once again have tapped the brakes and become more wary of the sector.”