Archer Aviation Inc. (ACHR) Earnings Call Transcript & Summary

Okay. Good morning, and welcome to the JPMorgan Industrials Conference. This conference actually has a long legacy with airlines and aerospace and defense companies, leasing companies. And this is the first year we're actually adding suburban air mobility companies. And to kick-off today of the first of 3 companies, we have Archer Aviation. I'm really pleased to have Mark Mesler, the CFO of the company. He's going to walk us through a presentation, and then we can move on to Q&A. So Mark, welcome and look forward to hearing the presentation and moving to Q&A. Thanks for joining the conference.

Yes. Thanks for having us, Bill, and thanks to everyone, for joining and on the webcast. As Bill said, I'm Mark Mesler. I'm the CFO of Archer Aviation. Archer Aviation is, I would say, a new breed of aviation developer and manufacturer in the urban air mobility space. This picture here is of our production aircraft, which we call Midnight. And the distinction of our aircraft is an electric vertical takeoff and landing aircraft. And you may have heard that -- you may have heard the acronym for this as eVTOL. That's a buzzword in the market right now. But essentially, an eVTOL aircraft has the attributes of a helicopter during lift -- during takeoff and landing where we're generating lift from those propellers that you see on the aircraft. And then we transition into forward flight where the lift is borne by the fixed wing. And so that's what an eVTOL aircraft is. It is all-electric. It is sustainable. It is quiet. So relative to helicopters, it is an extremely quiet form of transportation. So our goal is to get to commercialization in 2025, and I'll talk through the steps that we're doing to make that a reality. But what's the problem statement that we're trying to solve. So let's just take LA as an example. LA has over 50 million daily trips, of which 5 million or more take an hour terrestrially to get to the destination. Vast majority of these trips are less than 50 miles. And so folks are spending clearly a lot of time, and this isn't just an LA problem. This is a New York City problem, any major urban metropolitan area. What we've done is we've modeled -- when we developed our production aircraft and the technology that we used to develop it, we used data to help us drive what the problem statement was. So this is an output from an application we developed internally called Prime Radiant, where we model consumers' movements throughout the day from 6 in the morning to 10 in the evening. And we're able to assess where the big demand and where the big routes are within -- in city centers and within -- across a number of urban environments. So this is the use case we're specifically targeting. And so how are we doing that? So Midnight, our aircraft, is targeted for 1,000 pounds of payload, which will allow us to have 4 passengers and a pilot. We look at -- that 20- to 50-mile mission is core to our use case. So we think that can take 10, 15 minutes. Typically, that's 1.5 hours on the ground. Range of our aircraft is up to 100 miles at 150 miles per hour. But the use case that I just walked through -- the sweet spot is in that roughly 20- to 50-mile range because that will allow us rapid back-to-back missions for some of the routes that we're talking about, which I'll get to in a second. Relative to a helicopter, we have no single points of failure, highly redundant, in terms of the technology that we're deploying. And as I said, it's -- this is designed -- they're designed to be very quiet, unlike the single rotor on a helicopter that rotates near the speed of sound because we have a 12 tilt 6-propeller technology that we developed. The speed with which the rotors are rotating are a lot lower. And so the sound profile is significantly lower than that of a helicopter, which opens up a lot of -- a lot more use cases and environments for us to operate in. [indiscernible] Morgan Stanley's urban air mobility market [indiscernible].

[indiscernible] don't worry about it.

It is the largest out there, so we picked it. It's a $29 billion by 2030 and $1 trillion by 2040. Now what we've done and what we're in the process of doing is doing a bottoms-up view of this market opportunity as well. When we look at routes and the routes that we can service, we could have 20 to 50 different routes within a major metropolitan area. And I'll get to some of the unit level economics later, you can see why this becomes a very big market very fast. So how are we getting to commercialization? We have a strategy to not just develop a science project. We're in Silicon Valley. We see a lot of these science projects where companies sometimes just don't get to market. They continue to innovate, but they don't have a real use case for them. So we started with the premises, what is the fastest path to get to commercialization? And that made us drive a number of decisions. One is we had a business case-led strategy to develop a technology, which I just articulated. So we wanted to have a minimum of 4-passenger aircraft. We wanted to be able to focus on those 20- to 50-mile use cases because that is where the preponderance of the demand we see in cities. And we wanted to have -- we developed battery technology that allowed rapid back-to-back missions so that our technology -- we can charge our aircraft in 10 minutes for the next 20-mile mission. So when we think about commercialization, we specifically developed our use case and technology around that. Secondly, clearly, with an aircraft, we have a certification process we have to run through with the FAA. And so we did not design an aircraft, take it to the FAA and have them certify that because 9 times out of 10, you're going to have to have a redesign if something doesn't meet the FAA spec. So we actually were designing our aircraft in parallel to discussions with the FAA so that we could be very iterative in our design process, and that allowed us to get to our air certification or airworthiness criteria with the FAA last fall in a very expeditious manner. Finally, there is a mature supply base for FAA certified parts that go into aircraft. You think of the Garmin. You think of the Honeywell. You think of a lot of the incumbent aircraft developers are using a very mature supply base. And we wanted to leverage that supply base as well. However, we wanted to in-house and develop internally what we felt were differentiating technologies within the sector. And for us, that is the propulsion system. So we went out and sought some of the best propulsion mines in the world, both on the battery side as well as the engine design side. And we got -- resourced -- our leader of our propulsion team is Dr. Michael Schwekutsch, who came from Tesla. He helped develop the propulsion system for the Model 3 as well as helped in their manufacturing process for that. We have experts from Lucid, from all the big Silicon Valley tech companies, including Apple's Project X, that have helped us and have designed a propulsion system that had we went out and sourced that from a supplier, we would have had 30% to 40% more weight. And as you can imagine, payload and weight reduction in aircraft design or to enable payload, that 1,000 pounds of payload is clearly critical. So we designed our own propulsion system in-house. Our own battery technologies and battery packs were designed in-house using commercially available battery -- batteries themselves. So -- and then finally, we had these parameters, as I said, the 4 passengers, plus a pilot, the sequential 20-mile missions and minimizing direct operating costs. So we think that when we combine all those together, the strategy is paying off. We were able to check the number of boxes last year, and we're well on our way to getting -- achieving a number of commercialization milestones this year, next year, including certification with the FAA. So here's our time line. Through the end of next year, clearly, we've been working on the development of the aircraft, which I just talked about, to meet those use cases. The heavy lift between now and next year is going to be the certification with the FAA as well as starting to ramp manufacturing and build what we call conforming aircraft to do the tests for the FAA certification. In parallel, we also recognize that we can't -- we have to operate -- we can't operate serially in terms of developing the market for these. We have to develop the market in parallel. So we have a head of airline operations that is helping us think about what these little mini airlines or routes look like. We're working on financing of the fleet itself. We're also working on what is the -- what are the routes that we need to address when we get to commercialization. I'll talk about that in a second as well. So from 2025 to 2028, this is where you start seeing the nascent industry start to develop. We have a strategy, a two-pronged revenue strategy, which I'll talk about. But whichever one, whether we're selling the aircraft or whether we're operating the aircraft, there have to be routes that these aircraft fly. And we have a strategy of a trunk versus a branch route. And think of a trunk route as city center to an airport. There's high demand there. There's a high ability to pay. And then you have trunk routes off those like from a heliport here in Manhattan to Greenwich or somewhere on Long Island or out in New Jersey. So those would be branch routes off of these networks. We've also announced last week that we broke ground or starting construction on our high-volume manufacturing facility in Covington, Georgia. We will -- the goal of that manufacturing facility is to be able to manufacture up to 650 aircraft per year, out of the gate, not that we will build that many, but that's the capacity of it. So building out all of the infrastructure such that '25 to '28, we can start early operations, and then we'll see once we see the market adopt this, 2028 and beyond is where we see larger volumes and scale of manufacturing and operations. So here is our technical demonstrator, Maker, and you'll see this take off like a helicopter, and then it transitions into forward flight where you're transitioning the lift from the propellers to the fixed wing. So this is on our Salinas, and I think the webcast can't see the videos, but this is on our Salinas test facility. Maker achieved its first full transition flight in late November, early December of last year. And full transition means that those propellers are locked into forward -- full-forward horizontal placement, and you're traveling at over 100 knots forward. I think we had a chase plane for this one. We didn't have a chase plane for when we achieved -- it's expensive to have a chase plane. So CFO, I think, makes that [indiscernible]. This is our production aircraft, Midnight. This is at the Palo Alto Airport. We unveiled this in November of last year [indiscernible] when we unveiled this. You can see it's -- this is the one that we're going to market with, and we're going to get certified -- it is a pretty sleek forward-looking sort of blade runner type technology. And we're pretty excited about this, and I'll talk a little bit more about the design aspects of this in a couple of slides. Now to do this, we felt we needed some really valuable partners. And we've been fortunate enough to partner with United Airlines. United Airlines is a major investor in the company. They're also an operating partner. We're on the phone with United weekly. We have a -- they're also a customer. We have a $1 billion agreement with them for 200 aircraft with an option for another 100 aircraft. So that's up to a $1.5 billion contract with them. Last fall, we announced a $10 million deposit received on the first 100 aircraft, which, in aviation parlance, is called a predelivery payment on the first 100. They are a go-to-market partner as well. We're working with them to figure out what are the right operations for this, what is the right repair cycle or calendar look like. And we also announced with them last fall a -- our first commercial point-to-point route, which is from the 34th Street Heliport down here out to Newark Liberty International Airport. So it's a 20-mile route. The unit level economics of this, I was just -- I fly into Newark all the time, as you guys probably do as well. It's $100 from a cab from Newark to my hotel, and that's like $6.50 per seat mile. And that's about where -- when we get into unit level economics, I'll talk about that a little more. But this is the first commercial point-to-point eVTOL route that's been announced in the industry, and we're excited to work with United. And you can think about this as the value of this is we think we can get -- we're working to get the aircraft beyond the TSA. So you could go through TSA down here in Manhattan, get on the aircraft, 10-, 15-minute flight out to Newark, and you're beyond TSA there, and you can just get your [indiscernible] to your next point of destination. We also have a really good partnership with Stellantis. Stellantis is the merger of Fiat Chrysler with Peugeot. Carlos Tavares is their CEO. Carlos has a unique perspective on this space because he is the Chairman of, clearly, the large automotive manufacturer at scale. Stellantis produces 500,000 -- close to 500,000 cars a month, but he was also on the Board of Airbus. So he understands manufacturing, aerospace, defense products at scale as well. So Stellantis is helping us build out our factory in Georgia. They're bringing a lot of expertise for scale manufacturing. We're helping them. We understand the certification process with the FAA. We understand eVTOL. We understand a number of the aircraft aspects of this. Stellantis brings the scale manufacturing. So our goal is not to manufacture dozens of these as we get to commercialization. Our goal is to manufacture thousands of these eventually, if not tens of thousand of these, and Stellantis is helping us think through that. Secondly, they're also an investor, as I talked about. And then third, they also just provided us with an equity option to draw down another $150 million of capital from them over the next 2 years upon completion of certain business milestones that are loosely tied to some development milestones and certification milestones. So they've just been -- they've been a fantastic partner to work with, very forward-thinking. They -- I think they look at themselves as more of a mobility company, and they're playing a big role in helping us scale our operations as well. As I said, we've got -- we announced our Covington, Georgia factory. Covington is developing into a little bit of an EV corridor, Rivian is putting a facility there, LG Batteries are putting something there. And we have access to an airport, which is big for us, the Covington County Airport. So we've got 96 acres there, of which are -- we're building out our first phase of this -- of the factory is a 350,000 square feet factory, which will be capable of producing up to 650 aircraft per year. That has the ability to expand another 550 -- 500,000, 550,000 square feet to roughly 800,000 square feet. And at point, we'd be able to manufacture up to 2,300 aircraft per year. So again, thinking about and trying to not only have the technology in place for 2025, but the ability to produce, the ability to market and the ability to operate. So let's pivot to our business model a little bit because this is something, as an investor, you clearly want to understand. So we're going to market with 2 specific and unique revenue streams. One, there's a clear market for buying these aircraft. The contract or agreement with United for the 200 with an option for 100 aircraft, we act as an OEM. We sell the aircraft to them. The ASP on those, if you looked in the public documents, is roughly $5 million an aircraft. And so Archer Direct, we call it, we will sell to an operator. We also want to operate these aircraft to help build out that network or urban air mobility network, and we call that Archer Air. We think that this -- in that case, we would recognize revenue [indiscernible], so with every -- from every passenger, from every flight of the 4-seat aircraft, you would recognize revenue at that point. And so 2 unique revenue models: one, probably a little more lumpy in terms of the Archer OEM or Archer Direct; another one has more of a lifetime customer value over 10, 12, 15 years of the aircraft life, and I'll get into some of that economics here in a second. So here is the sort of the unit level revenue economics, and I think we've got a conservative number here. Typical ridesharing, 25-mile distance, $1.50 per seat mile. This may be a couple of years old, 60-minute trip, 10 trips per day. You've got maybe $140,000 from a car rideshare like an Uber type model. For us, at a 25-mile trip, say, 150 miles per hour speed, $3.30 per seat mile is pretty, I would say, is an average outside of like maybe some of the bigger cities. As I said, I think we're -- at a minimum, we can get $6, $6.5 per seat mile. But if you're -- if we're trying to size this and get our costs so that we can compete in the $3 per seat mile. So you can get up to 2 -- almost $2.5 million per aircraft, 25 trips per day, 365 days a year, 4 passengers, $2.5 million per aircraft per year. That probably goes to 3.5 if you're at $6 a seat mile. And then we -- publicly, folks have been talking about operating these at roughly $2 a seat mile is the cost on these. A lot of -- I think the big unknown -- we understand the cost of the pilots. We understand the cost of the aircraft. We understand the cost of electricity, et cetera. The big thing that's still being sorted out in the industry is landing fees. They're fairly expensive right now because there isn't a market for this. I mean, landing a helicopter in Manhattan 5, 10 times per day versus 25 to 45 landings per day from an aircraft. So that's the thing, I think, the industry is still working on is what is -- what do the landing fees look like in the economics. But this gives you a high level view of how to think about -- on the OEM side, $4 million to $5 million an aircraft sale. If you're operating, it's probably $2.5 million to $3.5 million of revenue, but a longer lifetime average because you're going to get that over 10 years. Team, we've got a really experienced team. Adam is our founder. Tom, he was employee #1 in this industry, Tom Muniz, our COO. He has personally developed and designed 8 aircraft from design to flight. Geoff Bower is our Chief Engineer, very similar. Tom was -- Larry Page hired him with Zee Aero, which was really the first company in this space, about 10, 12 years ago. Geoff has worked with Airbus Vahana on their aircraft. Dr. Michael Romanowski is our Head of Government Affairs. He was with -- he was the Head of Technology at the FAA. So he's helping us navigate the FAA landscape. The guy who designed that cool aircraft that we start off with is Julien Montousse. He came from Mazda, really great guy. And then finally, Dr. Michael Schwekutsch, the Head of Powertrain, I referenced him earlier. He runs our propulsion systems and has just done a fantastic job there. Time line of certification, loosely talked about these. But this year, we're working on -- last fall, we got our airworthiness criteria published in the Federal Register with the FAA. The companies in this space are loosely working on our means of compliance right now, which tells the FAA how we're going to comply with our airworthiness certificate. And we're -- in parallel, we're working on what's called subject certification -- subject-specific certification plans, SSCPs, of which we're going to have 18 eventually. So you can think about the airworthiness criteria is a document of about 40 pages or so that we give to the FAA. That means that compliance is a document that's roughly 400 pages. And then the subject-specific certification plan is going to be about 4,000 pages of documentation because the SSCPs are the specific -- here's the test that we're going to run across our aircraft system and systems to get to compliance. And then once we get all that finalized with the FAA, then we have to go out and test against those, which is largely what's going to happen next year. So our first piloted flights will begin in Q1 of next year. Heretofore, it's been autonomous. The first Midnight aircraft that we're building right now is going to be autonomously flown, but the first piloted flight will be first part of next year. And then at the end of 2024 is when our goal is to get our type certification. So with that, I mean, just wrapping up, we have -- we -- I talked about us executing the most efficient path to commercialization. I think we've also focused on realistic innovation. One of the things that you'll see with Archer is we're not betting on the next big battery technology. We're not betting on the next big tech to unleash our product. Our product is using readily available technologies right now. So we've -- I do think that we've got a realistic path and using realistic innovation to get to commercialization. We've got a production aircraft, which right now so far, four passengers and a pilot continue to be validated. We've got a couple of revenue streams that sort of derisk the business and then a strong balance sheet ahead, $531 million on the balance sheet at the end of December. We've got an option for another $150 million from Stellantis. So we remain very well capitalized. And with that, some forward-looking statements, if they were made [indiscernible].

All right. Great. Thanks for that overview. And I'm going to kick off with a few questions, but happy to take some from the audience, too. But I guess if we look at a 2-year period, '23 and '24, and maybe kind of stepping back from the details to -- where are we in certification today? What has been accomplished? And then what needs to be accomplished over the next few years to beat your time line? And maybe, obviously, people [indiscernible] type certification aircraft, but you have production, you have operations.

Okay. So certification is a -- sometimes it sounds like a nebulous concept with the FAA, but I'll break it down as to how we look at it. There's really 2 major parts to certification. One is where you tell the FAA what you're going to do, and they agree with that. And then the second half is you go and you do it and you perform all the tests. So I just walked through the airworthiness criteria, which we came to an agreement with the FAA, like this is what you're going to go certify on your aircraft. So we got that into the Federal Register. We're currently working on what's called our means of compliance, which is where we're telling the FAA how we're going to go and validate the airworthiness. So we're working on that piece right now. And then we're also working on the very specific certification plans, the SSCPs. So we're -- those 2 are being a parallel path right now. We just discussed on our earnings call last week that our goal is to get all of the SSCPs submitted to -- with the FAA by the end of April. The means of compliance, we have largely completed everything on our end and have submitted that to the FAA. And we don't see -- at this point, we don't see any pushback on our design parameters, et cetera. So we feel pretty good about where we are with the means of compliance, working with the FAA to get that done as well as the SSCPs. So that will take us through, let's just say, Q3 of this year loosely. And then for 2024, we'll start pivoting. The end of this year and through next year, we'll start manufacturing what's called conforming aircraft, which means aircraft that conforms and is FAA compliant. So we've already started that in our supply base. And by the end of this year, we'll have our first conforming aircraft manufactured, and we'll start piloted testing in Q1 of next year. And so all of next year, we'll be going through the testing process with the FAA that proves out and check the boxes and all of those. That is -- and as Bill referenced, that is primarily the airworthiness criteria. That's showing that the aircraft is safe and can be operated according to the FAA. There's also 2 other certifications that we have to get. One is a manufacturing certification that essentially -- the -- you have a quality management system that is blessed by the FAA that's saying that every part that you're producing and all aircraft you're producing is complying with FAA standards. So we're starting to work on that, instituting what's called a manufacturing execution system right now in our factory. And that will be done in parallel with the airworthiness. And then finally, there's a type certification -- type 135 certification, which allows you to operate the aircraft as well. And that's done in parallel. I'd say that the most difficult of those is the airworthiness certification. The manufacturing is not terribly difficult. You just got to comply to some manufacturing standards, and then the type 135 isn't terribly difficult either. So hope that's a little bit of a tutorial, a lot of words for the FAA certification process, but trying to distill it down, so at least you have an understanding of it.

You've taken a two-pronged approach. You have the partnership, obviously, with the United direct sales, and maybe perhaps there's other means to do direct sales. And then obviously, you want to operate a network. How should we think about the payback periods per aircraft and maybe the cash flow profile through time? You talked about 50%, 50% kind of at the start, but how does that kind of play out over a longer period of time?

Sure. So the -- we look at the Archer Direct or the OEM business as a complementary or a build for the UAM business because while we're going to go -- we're going to deploy these in networks that are we think are high demand and ability to pay such as those trunk routes that I was talking about, they're still going to take some time to build those out. So to help fund that and build those out, we believe selling aircraft to operators will provide some working capital to do that. So loosely, if that's $4 million to $5 million an aircraft, we think that that's probably a 2 to 2.5 -- less than a 2-year payback for an operator for us, clearly. The cost for this industry -- and we've talked about having like a $2 million to $2.5 million cost to manufacture these. So you can see, I mean, for us, that's a 1- to 2-year payback, depending on the ASP. Now pivoting to the UAM side, that is a longer-term sort of service that we'll be operating, depending on the market. We think it's $3 to $6 a seat mile. If I can get the $6 a seat mile for a trunk route here in Manhattan to Newark or JFK or LaGuardia, that's a 3 -- operating 25 trips per day, 365 days a year, assuming like a 3 passenger, I don't want to assume 4-passenger capacity, so conservatively, it's like 3 passengers, that's about $3.4 million. So that's 1.5 years to 2-year payback as well. So if the demand is there, and we're operating these, it's a fairly early payback.

Maybe that kind of leaves, I guess, Prime Radiant because this will be probably what used to inform, maybe not only your network, maybe also United. But one of the key things is utilization. If you have one passenger, you're losing money presumably to maybe breakeven those 3 or 4 obviously, is the best. But how is that going to be deployed practically? And I guess even thinking about it from a city level, what -- how are you going to make decisions on the cities, maybe whether it's yourself or your network or maybe United?

Yes. That's a really good question. So the demand profiles for the cities aren't random for us. We've taken a very data-driven approach to sizing markets. And actually, when I say markets, I don't mean just the city. I mean the specific routes within cities. So we had a gentleman, his name is Dr. John Peterson. He came from Uber pool, and he was one of the first employees within Archer. And he and his data science team have developed an application called Prime Radiant. And what Prime Radiant does is it monitors cell phone data throughout the day and models how people move through the city. So we can be very specific. If we want to look at a metropolitan area like Miami, New York, Chicago, LA, we can get very specific on using that data and how people move within the city. So we know in every city, Prime Radiant shows us that one of the big traffic patterns is from center city to an airport. And that's a really good starting point for us for a trunk route. Again, I've said a couple of times, ability to pay and demand. So we would start there. And then from there, Prime Radiant shows us what the next big routes are. So we could go -- we could look at Manhattan and -- or the greater metropolitan New York area and say, okay, what -- if I wanted to deploy 75 planes there, what would a network look like? And Prime Radiant will take all of that data and model out the number of nodes, could be 8 to 10 to 15 nodes, the number of aircraft per node and what we think that the volume is going to be or the throughput over that route is. So we use that. I mean, clearly, it's directional data, and we won't know until we get on the ground and start operating, but what that does is it takes the randomness away. It's not like, hey, we think this is going to be a good route. This looks cool from Parsippany to Manhattan. It's like this thing tells us, yes, if you do this, this is what the ASPs you're going to be able to garner. This is what the number of flights per day you're going to get. This is the number of aircraft to be deployed. So it's a really good demand indicator for us that we're using to model out how we're going to market.

Just pause here and see if anybody has any questions before moving on. Okay. Wait for the microphone, please.

Yes. Fuselage is made out of aluminum?

No. This is all carbon. So fuselage tail, wings, it's all carbon fiber.

[indiscernible].

Can you repeat the question, please?

Yes. Sorry, the question was -- 2 questions. One was, is the fuselage aluminum? And no, it's carbon fiber. The follow-on question was, how much are we saving relative to aluminum? And I'll be honest with you, I don't know that answer, but we could follow up on that.

I think the important thing is when -- you have to talk about a 1,000-pound payload, if aluminum weighs more, that takes away from range, it adds different certification changes, right?

Yes. I mean we do -- I mean we're like -- we debate and we scramble for grams, right? Because that's how important -- payload -- just as an aside. Payload finds you. You don't find a payload. Like every design decision you make across the aircraft, and if you choose to go with a Rolls-Royce engine, if you just -- if you choose to use aluminum, if you choose a certain avionics system, every gram matters. And so you'll hear our teams and us sit in meetings where we're debating on whether to use this part or that part, so we can save grams. But happy to follow up and -- I just don't know relative to aluminum how much we're saving.

[indiscernible] any questions from the audience. Okay. Maybe sticking on this -- on the build materials, right? I mean in addition to weight, you obviously have that performance. But you've talked about 80% of the [indiscernible] upon. Are these fixed prices? I mean what are the opportunities to drive down [indiscernible] or maybe, more importantly, just meet the target cost structure that can give you the margins you discussed in the presentation?

That's a good question. I mean cost reduction is something that's near and dear to my heart. I came from clean tech. And I mean, daily, we were trying to how much cost could we take out of the product. We do have -- generally, we are getting fixed volume and price contracts with our suppliers that -- one, secure supply, but also reduces any commodity risk, et cetera, going forward. We look at the cost, not only for the [indiscernible] itself, but other areas to operate these. We know what the pilot costs are. As I said, we know what the costs for maintenance, for batteries, et cetera. So the opportunities for reducing costs are not only within the [indiscernible], which will go out and get, I'd look at those as sort of standard, we'll go negotiate once we get started seeing volumes, we'll go back to our supply base and start negotiating some incremental costs out there. But we also from the network standpoint, we can get more efficient with how we're operating. We can look at what the repair and maintenance costs are. Batteries are an area that -- initially, they are consumable for us. They're going to be replaced roughly probably once per year on these aircraft. And so getting a longer life on batteries, things like that will help us reduce. So we've got a number of vectors for cost reduction that are fairly modest to get to our targets, honestly. So I'm hoping -- I'm hopeful that we have even some more upside on that.

It's an interesting thing, too, a lot of the airframe guys, a lot of the key cash flows related to aftermarket. What kind of opportunities do you see there? You mentioned maybe potentially battery replacement. What -- how does -- how do you think about aftermarket opportunities over time?

Yes. I mean typical for aviation, there is an opportunity to offer the repair and overhaul of -- that's why it's called R&O, repair and overhaul opportunities. That is a clear and present opportunity for us. Batteries have a second life. I mean our batteries, in order to get to that fast charge, high cycle time, if we pull them out after a year, there was a second life for those that could be used at the local vertiports potentially to even operate and charge the aircraft at the vertiports. So there's a number of use cases for those. So Tom Anderson, who's our Head of Airline Operations, and I spent a lot of time discussing what does the R&O framework look like. My [indiscernible] R&O is a profit center that actually helped companies through downturns. And so we think there is a significant opportunity for R&O here, which is consistent with sort of typical aviation R&O where you're offering not only the service of the aircraft, but also the parts and materials that potentially have to be replaced.

See if there's any questions before final couple of questions. One more here, please.

[indiscernible] I presume it flows?

This will flow, yes. Yes. But I mean there are specific FAA requirements around sort of like if you have to ditch the plane, if there's -- this actually has a -- is required to have reserve battery power to get to the next vertiport. So we've got actually 30% of reserve power. It's fixed wing, so it also has a glide path. So if -- I think up to 2 to 3 of these propellers could fail or the battery pack themselves could fail, but this could still operate on its own power with the remaining propellers. Second, it can glide. So this thing will -- can glide to a conventional landing. So while this is a vertical takeoff, this has wheels on the groundworks. So you've got the ability to glide it for a conventional takeoff and landing as well. So we hope we never have to flow, but it's carbon [indiscernible].

Final question. So use of cash, obviously, revenues not until '25, if things go well, presumably. What is your run rate? And when we think about your next big CapEx related to Georgia, how is that -- is there any way we could think about cost sharing, the capital requirements for you and partner, Stellantis?

We think we -- and we publicly said we believe we're going to displace hundreds of millions of dollars with the partnership with Stellantis. There's clearly our daily cash burn, but what we see with Stellantis is we're going to be able to bring in a number of experts that are going to help us design our process steps, the CapEx, which we would deploy there. And eventually, the goal is for them to become a contract manufacturer, and the assumption they become our contract manufacturer, they would clearly be buying the capital equipment to scale the business. And I'm sure in our piece price, we would have to pay for them over time. But from a cash flow standpoint, that really frees up hundreds of millions of dollars for us. It's a really good relationship with them.

We're unfortunately out of time, but Mark, thanks a lot for the presentation and the question-and-answer session. Thank you.

Yes. Thank you. Thanks again for having us.