Urban Air Mobility Archer Lands SPAC Merger, $1B United Airlines Purchase Order: What Investors Should Know

Urban air mobility company Archer has found a SPAC deal to bring its electric vertical takeoff and landing vehicle — eVTOL — to market. 

The SPAC Deal: Urban air mobility company Archer is going public in a SPAC merger with Atlas Crest Investment Corp ACIC.

The deal will give Archer $1.1 billion in gross proceeds. The $600-million PIPE includes an investment from United Airline Holdings UAL.

The deal values Archer at an enterprise value of $2.7 billion.

Shares will trade as "ACHR" on the NYSE if the merger is approved. Current Atlas Crest shareholders will own 13% of the new company.

About Archer: The aircraft company is seeking to become the market leader in urban air mobility. 

The vehicle from Archer is expected to travel up to 60 miles at 150 miles per hour. The vehicle can carry passengers 10 times faster than a car.

The company said it expects to unveil its full scale eVTOL later in 2021.

Marc Lore was the initial investor in Archer. Lore is a well-known entrepreneur who sold Quidsi to Amazon.com AMZN for $500 million and Jet.com to Walmart WMT for $3.3 billion. Lore recently stepped down as the head of Walmart’s U.S. e-commerce division.

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Partnerships: Along with the SPAC deal Wednesday, it was announced that Archer signed a $1-billion deal with United Airlines. The deal also includes the option to purchase an additional $500 million in Archer aircraft.

United said that one Archer eVTOL can reduce CO2 by 50% per passenger on a flight from Hollywood to Los Angeles International Airport. 

Archer's other partnership is a deal that was signed in January with Stellantis STLA. Through a merger of Groupe PSA and Fiat Chrysler, Stellantis is now the fourth-largest automotive manufacturer in the world.

The deal with Stellantis is for a low-cost supply chain and advanced composite material capabilities.

Growth Ahead: Los Angeles International Airport will be one of the initial Archer launch sites and is also a large United Airlines hub. Other cities mentioned in the presentation were Dallas, Fort Worth, Orlando and New York City.

Archer will operate under two business models of Archer Direct and Archer UAM. Archer Direct will operate as an aerospace manufacturer. Archer UAM will be a ride share business taking passengers 100 miles or less in densely populated cities.

A sample in the presentation shows a trip on an Archer vehicle from San Francisco to San Jose takes 17 minutes compared to 1 hour, 40 minutes for an Uber ride.

A trip from Manhattan to JFK airport is 22 minutes with Archer versus 70 minutes in an Uber.

Mass manufacturing could be a key for the company to grow its operations. The company is vertically integrated and will ramp up deliveries, with a new manufacturing facility expected in 2022.

From 2021 to 2026, Archer said it will produce 200 to 1000 vehicles per year. The number rises to 5,000 vehicles per year from 2026 forward. 

Future revenue streams could come from cargo deliveries, military, emergency vehicles, global expansion and charter flights, according to the company.

Financials: Morgan Stanley estimates the urban air mobility market will be worth $1.5 trillion to $3 trillion by 2040, according to the investor presentation.

Archer expects to begin deliveries of the eVTOL in 2024.

The presentation says each Archer ride share vehicle could produce $2.4 million in annual revenue and $1.1 million in operating income.

Archer forecast positive free cash flow by 2025.

Financial projections start at 2024 in the presentation with revenue of $42 million from 10 aircraft. The fiscal 2025 estimate is $1 billion in revenue from 250 aircraft. The company projects out to fiscal 2030, when it sees $12.3 billion from 2,300 aircraft.

Price Action: Shares of Atlas Crest Investment Corp. were up 34.2% at $14.99 Wednesday.

Courtesy photo.