Vertical Aerospace Ltd. (EVTL) Earnings Call Transcript & Summary

Hello, everyone. Good afternoon. We're about to get started. We encourage everyone to come in and take your seats, if not already. I'm delighted to welcome you to Vertical Aerospace's Capital Markets Day. My name is Gillian Levine. And alongside my colleague, Samuel Emden, we run the Investor Relations efforts for the company. A few housekeeping items before we get started. There's dedicated Q&A in the middle and again at the end of the session. We kindly ask that you hold any questions until that point. Immediately following the presentations, we will invite you to join us for a cocktail reception in the room next door where you'll have the opportunity to meet our leadership team. This event is being webcast and materials can be found on our Investor Relations website. A quick reminder, we will be making forward-looking statements which may involve risks and uncertainties. We encourage you to refer to the Form 6-K filed with the SEC earlier today for more information on these risks factors that may cause actual results to differ materially from current expectations. We have a packed agenda today with leaders across finance, aviation and national security. You all should have received a detailed agenda on your seats with the detailed timings. With that, please turn your attention to the screens for a video highlighting our vision and recent progress. [Presentation]

Good afternoon, everybody. Let's get the glasses on. Domhnal Slattery, and I'm the Chairman of Vertical Aerospace. And it's a real privilege stand before you today at what I think is a moment of great change in the aviation industry. For 36 years, I have been part of the aviation industry, founding and building 2 of the world's largest aircraft lessors, including [ Avalon]. And along the way, I've raised $75 billion in capital, built enduring businesses and work with airlines regulators, governments and investors across the world. And over the past 2 decades, I've worked very closely with the leadership and the Boards of the world's leading airframe and engine manufacturers, Boeing, Airbus, GE, Pratt & Whitney and Rolls-Royce. And my role as one of their largest customers was often to challenge their strategic assumptions and most importantly, to ensure that they remain grounded in the needs of their airline customers because once an aircraft achieves certification, there is really only one measure that truly matters, and that is whether it serves the customers safely and profitably. And this perspective that I have, which is born of decades at the intersection of manufacturers, financiers and airlines is something that I bring to Vertical every single day. And I believe it is an insight that few in this emerging sector possess, and it gives us an advantage that is both distinctive and enduring. And that journey over the last 3.5 decades has taught me that aviation is not simply about the aircraft. It's about foresight. It's about discipline. And most of all, it is about trust. And those same qualities are at the heart of this company vertical aerospace. And they are why I can say to you today that this is the right company with the right aircraft at the right moment in history to transform the way the world moves. And by the time I conclude these few words, I want to leave you with 3 messages. The first is that [ eVTOLs ] as a sector is the most transformational shift in aviation since the dawn of the jet age. The second is self-serving. And that is that Vertical Aerospace has the team and most importantly, the strategy to win. And the third is that the VX4 this aircraft you've just seen is unquestionably best-in-class, with its most important moment in its history, full transition flight, fast approaching. I believe we're now entering the third great transformation in aviation. And if you think about it, over the last 100 years, aviation has redrawn the map of human possibility. In 1903, the Wright Brothers gave mankind wings, and in the 1950s, the first jet airliner, the British-built [ Comet ] shrank the world, putting global travel within reach of every nation. And each of those breakthroughs created new industries, new business models and new wealth. And today, unquestionably, we are at the threshold of the third great transformation. Safe, quiet, sustainable electric flights, which is going to give us back the one commodity that's most precious, and that is time. And I predict that within 2 decades, eVTOL aircraft will be as integral to urban transport as high-speed rail or the underground. Cities will design their skylines around them. and passengers will expect them as naturally as they hail or book a taxi today. I mentioned the word trust in my opening remarks. And so let me address what I think is the most important point first, safety. In aviation, safety is the currency of trust. Vertical's VX4 is being certified to the highest possible standard globally, 10 to the minus 9. This is the same benchmark that is used for Boeing and Airbus commercial aircraft. And this is not simply a technical achievement. It is a psychological one because it gives regulators, operators, and you, the passengers' confidence to get on this aircraft safely. Now later this afternoon, you will hear from Patrick Ky. Patrick was formerly the Executive Director of EASA, the European aviation regulator. And I think it's self-evident when a regulator of this caliber and experience joins the Board of an OEM developing a novel technology. The message is pretty clear. He is confident in our ability to certify on time and that is in 2028. Now beyond safety, the VX4 cabin offers 50% larger capacity, 50% larger capacity than any of our principal competitors. Our cabin is designed for business class comfort with a 4-seat layout offering a premium service and uniquely, we offer a 6-seat layout providing affordable high-volume travel. In either case, it redefines what people will expect from short-haul mobility. And also uniquely in our aircraft, you can check in for 70-pound bags. No other cabin, none of our competitors can do that. I'd like to talk about focus for a minute because one of the great lessons of my career is that investors reward clarity and focus from management teams because businesses that try to do too much generally fail and businesses that focus typically endure. Vertical Aerospace is disciplined. We are and we will remain an OEM. We build aircraft and we service those aircraft by supporting our customers. We will not dilute our strategic focus, trying to become an operator. It is always better to partner with your customers, not compete with them. It's pretty obvious. And through our proprietary battery services business, and I think this is really important, we will generate long-term contractual multi-decade recurring revenue. And within a decade, we expect that our battery services business alone will account for over 30% of our earnings. And for those of you that follow the aerospace and defense industry, this is a proven model, and particularly in the aero engine sector because that model delivers growth and resilience. And I have a little bit of knowledge in that given that my brother was the Chairman and CEO of GE Aviation. So we know it works. But ultimately, any business, it's about the people. And I think we've assembled a team drawn from the very, very best of aviation, engineering, energy and defense. And to support our world-class executive team, a number of which you will hear from today. I've spent the last 10 months assembling a new Board and a cohort of advisers to support the business as we move to commercialization and the industrialization of this product. This not only includes bringing on our newest Board member, Patrick Ky, but also Eamonn Brennan, as a Board adviser. Eamonn is the former Director General of Eurocontrol. And for those of you that may not know, Eurocontrol coordinates Europe's airspace and he is supporting Vertical in building out the ecosystem to operate these aircraft safely. Today, you will also hear from Lord Andrew Parker, the former Director General of MI5, who has more recently Lord Chamberlain to the late Queen Elizabeth the second, the most senior official in the Royal household. Andrew has almost 4 decades of national security experience globally, right at the top of the food chain. And I'm delighted to have him helping us navigate the complexities of working with government and the defense sector. We were also joined in May by J.K. Brown, Kris Haber and Carsten Stendevad who between them have decades of deep capital markets experience and deep credibility. This year alone, we've raised about $160 million from new high-caliber investors. And we will return to the markets in due course as our current runway extends to the middle of next year. Unlike some of our competitors, we have embraced the concept of working with Tier 1 aerospace partners. These include Honeywell on the avionics, Aciturii for our airframe and Bristow for global operational support. And these are not just names on a slide. They are the partners who will help deliver the VX-4 safely, on time and at scale. And I'm pleased to say that development milestones are being met. And in particular, and you'll hear more about this today, we remain highly confident that we will achieve a successful transition test flight in Q4. That, my friends, is the Holy Grail and it will be a pivotal moment in the history of this company. And there I say it will act as a catalyst for our share price. Why? Because it is a fundamental derisk point. It is the moment we have demonstrated to regulators that this aircraft works. And frankly, with an order book of over 1,500 aircraft, we have an amazing foundation for success. And today, you will hear from 2 of our customers. One, one of the largest aircraft leasing companies in the world; and two, the founder of the largest low-cost airline in Southeast Asia. Now if you might, let me take you for a little look into the future. Just imagine a world where journeys that once took hours on congested highways are literally completed in minutes. We're flying to a business meeting across the mega cities of the world is no more complex than ordering a taxi, where hospitals, police forces and emergency responders rely on safe electric aircraft that are quieter, that are cheaper and much cleaner than helicopters. And my friends, this is not a distant dream. It is a reality, taking shape in cities across the globe already and the VX4 will be at its center. We are also at a watershed moment for the defense industry. The hybrid electric version of the VX4, which we will tell you more about later is going to open significant market opportunities for us, moving goods, extending range and supporting national security. Aviation has always been dual use, civil and defense and the VX4 will be no different. So let me close by returning you to the 3 messages that I wanted you to take away today, just 3. First is aviation is undergoing this third great transformation, electric flight. Second, vertical aerospace as the team the partners, the vision and the discipline to be the market leader and deliver lasting shareholder returns. And ultimately, the third thing I want you to take away is that the VX4 will be the defining aircraft of this transformation. Ten years from now, when people look back at the dawn of electric aviation today, they will remember who stood at the front. They will remember which aircraft became the standard, and they will remember the investors that saw that future first and the future is here. The aircraft is the VX4 and the company is Vertical Aerospace. This is not just an investment, ladies and gentlemen. It is an opportunity to help shape the next history of aviation. Thank you very much for listening to me. And I would now like to introduce you to our CEO, Stuart Simpson. Since stepping into the role of CEO just over a year ago, Stuart has unquestionably led a step change in our business. His focus on execution, the development and delivery on a robust business plan is simply world-class. And I know he's got some great interesting updates for you. So please give Stuart, a warm welcome to the stage.

Good afternoon, everybody. Great to see you all here. I can safely say, if this was 12 months ago, this meeting would take place in a phone box and it would be me and [ Jason], right? That will be -- we could not get media, we could not get investors, we could not get banks analysts. It would be [ Jason ] and I in a phone box. So to be stood here 12 months later is a phenomenal justification and validation of the work we've been doing over the last 12, 15, 18 months. It is utterly transformational. As Domhnal talked about, our new Board members, we could never have imagined to have that quality of Board members this time last year. It is utterly transformational. To have 100 people in here with us is brilliant and a huge thank you to all the investors that have put your trust and faith in May and the team. And in particular, I know we've got some investors from [ metric Capital ] who have invested both directly and through [ Mudrick Capital]. So again, thank you to all of you for coming. This really is something above and beyond what I could have dreamed off 12 months ago. So we are in great shape. We have transformed and just to validate that one little bit more. If we look at the guests that are speaking today with [ Tony Fernandez], with [ Scott Galloway], with [ Savi Syth], with [ Jim Morrison], we are absolutely blessed to have these people coming in, committing their time, their reputation, their energy to work with us to talk about us. It is, again, above and beyond what we could have expected. For those of you who don't know me, I'm Stuart Simpson, as Domhnal said, the CEO. Thank you very much for the kind words, Domhnal. I haven't raised $75 billion. I have done 30 years in engineering-led businesses, led huge, large, complex organizations, transformations, development programs for many, many years. And that led to [ 4100 ] businesses, the latter end of my career. I have a deep understanding of how you bring a product to market for automotive, aerospace, that's what we're doing. I genuinely believe, and I'll say this again through the course of today, we are the only people in the industry with a true understanding of what you have to do and how you have to do it to bring an aerospace product to market. We are the only ones that are doing this in a rigorous engineering-led way. We know what we are doing. And you'll hear from [ David and Michael ] and some of our Board members in terms of how we bring that to life. Now if I turn to a little bit of what we've done over the last year, Domhnal talk about how we've relaunched the business. We had a flightpath 2030. We put that out last year. It was our strategy on how we lead the industry, how we go from where we were last year, prototype shop, no plan to something that leads the industry from then on through to 2030. So today, I can provide an update on that because we've got 12 months, 15 months more data and give you more fidelity, more precision, what was already a relatively conservative plan with further derisked. So a significant update on that. Then there's 3 key questions I get asked. As I go around and meet investors, does it work? Can you certify it? 20 seconds. It's all you need to remember, 20 seconds. Can you build it? And where are you going to build it? Where is your factory? [ Bristol]. It's all you need to remember. And how much does it cost to get certification? You guys have got to catch up. You have miles in a hole. No, we're not. We know exactly what we're going to do, and it's less than $700 million. And I'll take you through each of those. So just to remind you what we are building on what Domhnal said, we want to take 2 hours into 10 minutes, liberate billions of hours for people. Clean, safe, silent, scalable, but importantly, at a mass transit cost point, we've modeled out over 1,200 routes based on mobile phone data, how many people are doing the roots, what load factors are, how you deploy the aircraft very conservatively, per seat per kilometer. That is mass transport. This is truly transformational. You've got to make the first step. I believe we are the first step. We know how to do that. So if I then turn to Flightpath 2030 and how we are updating and derisking flight plan. This time last year, I had already signed off an investment in a hybrid powertrain been running on the bench now for over 18 months. We know it works. Difficult bit with a hybrid is you've got a power source, you've got a battery, you've got an EPU, you have to get them to talk to each other. We've already done that, already done it. We're just going to swap out the power source. This thing works. It's going to be flying next year. So we put that in our plan. The cost to go from where we are today to certification, 75% of those costs are contracted or quoted, giving great fidelity on what it's going to cost to get there. If you look post certification, over 50% of the costs are contracted or quoted both cases, every single major system or component is in that bucket. It gives us great fidelity on the plan. This is something we can and will deliver. I've been doing this for 30 years, more than 30 years, unfortunately. And every time I go in and talk to a Board, it's normally do more, do faster next quarter, how do you drive that? Completely different discussion. Completely different discussion. We've wound back and been conservative on every single step of the way. We will deliver this for less than $700 million, and we will outperform every single metric post certification. I have 0 doubt about it. absolutely 0 doubt. It was a completely different discussion from the usual Board discussion. So with that, turning to a couple of updates that we have on the Flightpath 2030. Last year, we talked about 150 deliveries by the end of 2030. We'll be up to 175. So we scale slowly. Certify '28, ramp production in '29, learn, drive forward 175 aircraft delivered by the end of 2030. Importantly, it pulls forward cash breakeven to Q4 2029. A year earlier than before. 2030 will generate $100 million of free cash flow on the most conservative basis I've ever seen. We can and will do that. And it's because of those things I've mentioned, we've got a lot of this already contracted it. And I'll talk about the manufacturing to build on that. So now turning to the 3 big questions. First one is, does it work? And can you certify it? You've seen the video, I hope with the aircraft flying. This thing works. We are doing every single moment of flying to a higher barrier than anyone else in the world. They don't even come close to what we have to do to fly our aircraft every single day. We do it jointly with our regulator. They have a liability if this aircraft crashes joint with me, their Chief Executive and me. We are jointly liable if there's a crash. So you can imagine the level of focus that puts on the regulator to say, yes, you guys go fly over school. You guys go [indiscernible]. We've already done it. We know we can certify this. And I said 20 seconds, that's all you need to remember. Our aircraft has taken off vertically like a helicopter. It's landed vertically like a helicopter. It's accelerated like a helicopter. It's decelerated like helicopter. It's taken off like an aircraft. It's flown like an aircraft. It's landed like an aircraft. We have a 20-second moment to go from 30 knots to 17 knots when it flies like an aircraft, helicopter to aircraft to helicopter. That's all we've got to do. The last 20 seconds in all the hundreds of kilometers we flow. We have 20 seconds. That's it. At that point, as Domhnal said, this is a major technology and certification unlock. It proves the concept of the aircraft works. At that point, we drive through certification and industrialized. There are no late surprises and we actually have Patrick Ky to thank for that. Patrick was instrumental in writing what's called SC-VTOL, the regulation under which we're certifying. It is clear, it's stable. There are no late surprises, prove the concept, certify the aircraft. 20 seconds. It's all we've got left to do, and we're going to do it this year. Next big question. Where do you build it? How are you guys going to build it? I'm really, really pleased to say we're going to do this in [ Bristol]. So all you need to remember. We're already in [ Bristol]. We're expanding the footprint we already have. Let me take you through the aircraft, first of all, really important to understand the manufacturing philosophy. No drilling, no reaming, no painting. Every single activity that creates dirt and mass is pushed into a supply chain. You park an airframe in a module and you pull in components, subsystems and you attach them to that, as a big [ cap], entirely modular, entirely scalable. So nothing to do with building 1 million [indiscernible], literally nothing. I spent 16 years in the automotive industry. This has nothing to do with building a [ Corolla ] or 700 Dodge [indiscernible], nothing. It has everything to do with how you build a McLaren hypercar, a Ferrari hypercar, a Bugatti, a [ bespoke ] Rolls-Royce, a [ bespoke ] Bentley. We're going to have 100,000 square feet of space, right where we already build and fly the aircraft reduces cost, minimizes risk entirely scalable. That will see us with productive capacity through '29 into 2030. Beyond certification. The battery exactly the same philosophy. We're expanding the current footprint. We're tripling the size of our vertical energy center. It gives us the capacity for research, development and production of the battery and the hybrid powertrain. Low cost, low risk, no white elephant factory destroying capital. No white elephant underutilized big, empty factory. We scale as we grow. We do not waste the dollar. So [ Bristol], that is how we're bringing this to life. The final question is, how much does this cost? How much does it cost to bring its certification? I've already explained, we've got a lot of this nailed down. 75% of our engineering costs that are being pushed to the supply chain are under contract and quoted. That means I've got a great understanding of how much this is going to cost. I've explained the manufacturing ramp that we have to do. I know the cost of it is baked in here. So there are no surprises. We're certified under SC-VTOL. We flush out all the engineering surprises in that 20 seconds. At that point, we're shrink wrapping and industrializing, $700 million. It's a huge amount of money. But it's a tiny amount compared to what our peers spend, little bit more than they spend in a year. That will take us to certification. I think that's quite remarkable. And it's a reflection, as Domhnal said, focus, focus, focus. No distractions, OEM and an industry-leading understanding of what to do and how to bring an aerospace product to market. No one else has that clarity and precision of what you have to do and how you do it as we have. And you'll hear from both [ David and Michael ] with years and years and years of experience. In our top team, we have over 30 aircraft or powertrains certified in the aerospace industry. No one else comes close. So this is why I'm comfortable we can beat the $700 million. We know what we are doing, a clear set of regulatory standards. So the buckets that, that falls into. We have -- and everything here is kind of round numbers all be plus/minus 10%. It's about $550 million on engineering. Our people. We're a public company. We have to run the business, and cost go with that. That's one bucket. The next bucket is nonrecurring costs. 75% well understood. The rest is pretty small stuff. [ 225], you then add on the CapEx for fit out and the buildings I've talked about, gets you a bit over $800 million, you knock out the cash in the bank baked within that, plus/minus $700 million, and this is why I know we can beat it. There is $70 million of working capital to build the first year's worth of customer aircraft delivered in 2029. It's not really a cost to certification, but it's in that time window to the end of '28, so I've included it. But if you want to be pure about it, you cut that out because that's working capital. And we're talking to government about how they can help support as we bring factories and facilities to life, further reducing less. So I have no doubt we're going to beat that. Absolutely no doubt we can and will put this aircraft in the air for less than $700 million because it's already out there, we understand all the cost bucket. So just starting to wrap up. Domhnal said, we have the best aircraft. I won't go into why you'll be hearing about it. We have the best aircraft. We have the best business model, we're the most efficient we have industry-leading knowledge and understanding how you bring this product to market. No one else gets close. 20 seconds, [ Bristol], 700 million. You put all that together, major technical certification derisk, absolute clarity of process and certainty of the money. And all of that brings around cash flow breakeven end of '29, $100 million free cash flow, 2030. We ramp from there to 900 aircraft in 2035 at a 40% margin on the most conservative business plan I've ever seen. This is why I believe vertical is well placed to lead this industry. We can and will be the single most successful player in this space. because we have the focus, as Domhnal said, that is what we're doing every day. So with that, you're going to hear a bit about why not just I believe, but why our Board believes, why our customers believe, why investors believe. We can and will be the most successful in this space. So thank you very much again for coming. As I say, it would have been me and [ Jason ] in a phone box last year. It's great to see so many people here. Thank you very much, and I hope you enjoy the rest of the day.

Two things that I took from that. One, the $700 million is just a tad over what our principal competitors are spending per year. Just think about that. Think about capital efficiency. It's quite startling. The second thing is we've assumed 0 coming in from our customers and progress payments. Very few manufacturers will present you a cash flow with no customer payments. We decided to take the most prudent approach possible. Now it is really a privilege to welcome our next presenter to the stage. I first got to know Patrick at the start of the year because we'd identified him as the absolute best candidate in the world to bring on to our Board to get us the deep certification and regulatory experience that we felt we needed. And why was he the best in the world? Because quite simply, he's the guy that drafted all the rules when he was the Director General of EASA. So this 10 to the minus 9 safest certification standard in the world was drafted by Patrick Ky. He's now on our Board and chairs our certification committee, and it's genuinely a privilege to invite him onto the stage, Patrick.

Thank you, Domhnal. Good afternoon, ladies and gentlemen. I'm French, so I'm afraid you will have to bear with my accent, I apologize for that. So I'm Patrick Ky. I'm an aviation engineer, aeronautical engineer. I just joined Vertical's Board 2 weeks ago, actually. But I have made a lot of studies like any regulator does into Vertical in order to basically see and ascertain if I was making the right choice. I will explain to you a bit more about that. I was in charge of EASA up until 2 years ago. Now I'm currently the Head of the Aviation Innovation Agency for the government of Singapore. Previously to EASA, I was in charge of the [ Single European Sky ] program for Europe. It's an innovation program. I led that for 7 years. And before that, I was working in the European Commission and in the French Civilization Authority. I've seen a lot of what aviation offers in terms of jobs. Obviously, the most interesting part of my career was with EASA. I've been in EASA for 10 years. I faced, unfortunately, 5 major events, accidents, such as the [ German Wings ] accident, the Boeing 737 MAX accidents the war with Ukraine and so on and so forth. From my years with EASA, there were basically 3 conclusions that I drew to myself when I left EASA. The first one is that aviation is extremely safe. It's by far the safest transportation mode in the world. But the level of safety of aviation that we have reached today is not good enough. I've met with victims' families from the [ Germanwings ] accident, from the [ Lion ] accidents and believe me, when you are faced with families of victims, you wish you had done more in order to prevent those accidents. And that's really something that I believe aviation is extremely safe, but it's not safe enough. We can do better. My second point was that aviation is always seen as very conservative. Pilots, they refuse automation. When I was in EASA, I launched a project for single pilot operations thinking that AI could assist pilots and do a number of tasks. And this task has met with tremendous position from pilot unions for good and bad reasons. But that's a bit the tradition in aviation. And my strong belief is that innovation can actually make aviation safer. And that instead of resisting innovation, we should embrace innovation so that we can become a more efficient, more sustainable and safer domain. So I brought all those thoughts with me when I left EASA, and I decided to join Vertical's Board. We can go to the next slide. Why? When I have been faced in my EASA life with a number of companies in aviation. And in fact, their success of failure boils down to 3 dimensions, really. The people, the culture and the product, okay? And the people I'm going to say things that you are not going to like, but I will say them, nevertheless. I saw too many times extremely successful companies being doing very well, having very innovative products, which sank or became less good, let's say, because all their management and all their management decisions were taken over by financial people. That's where I thought that you would not like what I was going to say. Aviation is a very technical business. Of course, you need financial people to drive the business. But at the core of the product development, the DNA of an aviation company lies with its engineering capability. That's what I strongly believe. And that, I have to say, I found surprisingly, surprisingly, I found with Vertical. I found engineering teams, which were extremely competent with people that are [indiscernible] from behind, and my former Certification Director, [ Trevor Woods ] joined Vertical, for instance. But I met the 2 gentlemen that you will listen to later on, you will see their amount of knowledge, their belief in what they say is just standing. And this is what I liked in Vertical. The power of strong technical leadership together with what Domhnal is bringing and Stuart. The overall strategic view, financial view where our revenues, where is our market and so on and so forth. This is quite unique, I think. This is quite unique, and I loved it. Second aspect, culture. There are different types of cultures for the aviation companies that I know. There is a culture of the startup, which becomes bigger and bigger and which relies on one [ goal ]. What I have seen in a number of instances was that this became a difficulty because the [indiscernible] did not accept to be contradicted and even the best of the best, sometimes at mistakes. So that's one kind of organization. The other type of organization is an organization where you have so much conservatism but no decisions are taken. People are afraid of delivering anything, do not take any risk. That's another type of companies. I know a lot like this in aviation, where when you do inspections of their products or their processes, everything is perfect but they don't deliver anything. They don't deliver anything meaningful. And you have the third, culture, which is the people who are selling anything that you want to sell. They promise things all over the world and they disperse themselves in different regions of the world. But at the end of the day, there is nothing behind. In Vertical, I have not found any of those cultures. I have found a culture of focus on what needs to be done. I'll take back what you were saying, focusing on what needs to be done. Not thinking about overselling things, thinking about, okay, for the next 6 months, for the next year, I need to focus on what I have to deliver, and I have to deliver in the right manner. Third dimension, it's the product. You have seen the video. I was certifying an aircraft [indiscernible] with only one passenger and one pilot. This product doesn't -- I mean you understand that it cannot make sense from a commercial perspective. There was another product that I was certifying. Even I was not understanding how it was designed, how it could fly. And there, it did not go well. It's not because I have a better engineering knowledge than others, but it was so complicated, but it could never fly commercially. Here, with Vertical, you have a machine, which is, at the same time, complex and simple. It's complex because to be able to take off and then to fly like an aircraft you need a tilting of the routers, it's complicated, but the rest is extremely simple. And that's what I like in the product. Plus it's a beautiful product, I have to say. It's a beautiful product. I look forward to sitting in it. So those are the reasons why I chose to join Vertical and for the last 2 weeks, I've enjoyed very much working with you, and I look forward to the next months and years. Next slide. So the [ U.K. CA and EASA ] have signed a bilateral agreement. So they work closely together on the certification of the vertical products. There is this notion of one in 1 billion safety objective, 10 to the minus 9. When we started to draft regulations on advanced air mobility, in fact, we started by drafting regulations on drones, UAS. And what we did in Europe as in the U.S. is that we decided that the drone belongs to general aviation. And therefore, the framework for certifying U.S. drones was the CS23, which means you certify it as if it is a small airplane, okay? Not used for commercial purposes. We developed this. So flying during night, in during day and night in all kinds of conditions with all kinds of weights and ranges. Then came the question on drones or vehicles, manned vehicles, which could transport passengers. And that's where we disagreed with [indiscernible]. The [ FAA ] created this notion of safety continuum. So they used the 2 which is the baseline for general aviation, which is used for drones, and they evoluted it towards eVTOL, okay, which has its pros and cons. The pro is that it allows for more experiments. It allows for more flexibility. It allows for readjustments, which can be made by the industry when you develop the product. We and I, because I was really involved in that choice, we decided that if we were transporting passengers commercially, we needed to provide the same level of safety to the passengers as if they were in the commercial airplane, which was a fundamental difference with [indiscernible], okay? This is the reason why in Europe, we defined our very own rules for the [indiscernible], so the so the vehicles which are used commercially to transport passengers with a target level in terms of safety, which is the same as for commercial aviation. Why? It's because we believe, and I continue to believe that those eVTOLs will become a mass market in the future. And if you have a mass market, you really cannot afford to have a lower safety target than the one that you have with commercial aerospace, okay? So that explains our major difference. The second point, which is a very cultural difference between the U.S. and Europe is that Europe is composed of 27 countries, the U.S. only one country. And the fact that we are made of 27 countries means that we have to define very precisely everything in advance so that it's the same rule, which is going to be applied by the 27 countries. So the way in which we build our regulatory environment in Europe is that we tend to define with an extreme level of precision, most of our routes. This has benefits and this has drawbacks. The benefit is that it's very, very clear. Everything is defined. The drawback is that it's less flexible. So it is the same for the SC-VTOL, which means that the rule that we wrote was published in 2018 or 2019. It sets very clearly what are the requirements to certify an eVTOL. We published because we publish that as well, what is called the means of compliance, and this is the set of guidelines saying, okay, this requirement, you can meet it through simulations, through models, through different types of ways of doing it. We published everything. In the U.S. I'm not saying that it's wrong. In the U.S., the approach is different because since the rules are not that clear, not that were defined, and they evolve according to the certification projects, which is taking place. The means of compliance are not public because it depends on the specific project you are talking about, which creates a lot of uncertainty on what are going to be the next phases. And also, it creates uncertainty for the competitors what was accepted for this one and what will be accepted for me. In Europe, you don't have that. Everything is public. Last, but not the least, you have the certification of the vehicle, but equally important is how you operate the vehicle. That means the training, the air operations and how you maintain it, okay? And for this, we have written down all regulations, so for training, for maintenance or air traffic control and so on and so forth in Europe. The good news is that those regulations are very close to the ones which were written in other regions of the world. in Southeast Asia, in South America and Central America, in the Middle East, in North Africa, in Africa in general. Because since the EASA model was younger than the FAA model. And since on top of it, it was the result of discussions between 27 states. Our regulations for operations have been taken as the basis for a number -- the majority of regulations for aviation in the world. And this is also, I think, a benefit of our system. Next slide. So coming back to Vertical and the way I have seen so far. Vertical approaching certification because of our approach, where everything is written down in the SC-VTOL in the guidelines and in the regulations. What I have seen is that vertical has front-loaded a lot of the work. What I think is working very well, even though at the start, it was a bit less easy is the relationship between Vertical and the regulator, [ UKCE ] and EASA. This is a must, especially for a project in which both the industry and the regulator are learning at the same time. You need to have a very, very strong partnership in which you exchange all information in a very fluent manner. And I think you meet with the [ UK CA ] every single week, every single week. And that allow us to derisk a lot of the things which are likely to happen later on during the certification process. So this is extremely good. In the case of the [ FAA], because of what I explained to you before, which is that the rules are less defined and evolve with the project you discover things much towards the end, okay? I'm not saying that we are not going to discover anything substantial before we certify the aircraft. But at least, we derisk the thing, having this dialogue and having tried at least to solve most of the issues right from the start of the project. So I think that's really something which works very well so far. We are in discussions with the [ UK CA ] and EASA on a better use of models and simulation tools because the -- especially with AI, but we've all the data which are generated by flight tests, we can certainly do better than just repeating the flight tests. And this is something that we are doing with them, and I have good hopes that it will it will result in simplified flight test for certification. Next slide. Why all the things that I mentioned to you matter in my view? First of all, the certification process is a very risky process, risky, especially if you discover things at the last minute because if, let's say, 1 month before the target date for certification you discover that your design cannot deliver the expected target, then you are in big, big, big trouble. And this unfortunately happened to our friends from [ Volocopter]. So the best is that you derisk as much as you can along the process, okay? And I believe that we have started to do that. between Vertical and EASA and the [ U.K CA]. Second point, the market for our vehicles is going to be a worldwide market and EASA has -- I can't talk for the [ U.K. CA ] because I don't know, but EASA has bilateral agreements with a number of countries around the world, which means that their certificates will be recognized by a number of countries around the world. Moreover, if you can do 10 to the minus 9, if you build a safer aircraft, probably it's going to be much easier to certify it in countries where the threshold is lower. So if you think about this approach, of having a strong partnership between Vertical and the regulators about having a more constraining safety target, which has been set for the vehicle. I think that we are putting together a project -- a product which meets all the requirements for a successful story and for a successful investments for the future. Thank you very much for your attention.

Patrick, that was fantastic. We've now got a first Q&A session. So chance to ask myself or Patrick, anything, anything at all. We've got roving microphones. We've got one down the front and then we've got one over there.

Congratulations on all the progress and good luck for outline that you [indiscernible]. So one of the questions I have is between 2025 Q4 and 2028, what are the milestones that you will have to achieve? And is this $225 million in nonrecurring expenses enough to achieve that?

Yes. So definitively enough. The big milestones for those of you with an engineering background, will recognize this. When you've designed the product, which we've done, we've built the prototype, 20 seconds left to go. The next big one is called the CDR, a critical design review, at which point the engineers put the pens down, you've locked in the whole supply chain. We'll be doing that in the middle of next year. The next one is you build the aircraft to that design, which we've already in the aerospace terms initiated production because we've already ordered components for it. First, one e of those all complete and not end of next year, start of the following year, and then you just fly them. We build first one, fly it. We build 6 more, fly it. I think, as Patrick said, we're working incredibly closely with the regulator, absolutely hand-in-hand to minimize the number of flight hours we're doing because we've got a model that based on everything we've seen, is 99.xx percent accurate to what the real aircraft is doing. So using AI tools, as Patrick said, you can massively accelerate. It isn't about building loads of aircraft and flying them for 5 years. This is a new way of doing it that the regulator is on board with. So yes.

Just one more from me. What makes the ability to carry more load? Is it design features, material? Is it the weight of [indiscernible].

Simplest thing is at day 1, this company built an aircraft that's bigger. It's simply got a larger tube under the wings so you can put more stuff in it. Because we knew that from day 1, bigger tube that we'd already put more people in, more luggage in, we designed a battery to cope with that. So -- and it's all in the plan and underpinned. Thank you. I think next question was the gentleman in the second row and then on to the front row. Actually, it was the one at the end, but don't worry.

[ Andre Shipper ] from Cantor Fitzgerald. I guess, as someone who's been covering the industry for 4 years, happily sharing that I think certification and commercialization is not really a question of if, it's a question of when. This will happen, and we're getting closer and closer. I guess my question is can you just remind us in terms of the aircraft today, what components are being manufactured in-house versus what are you currently outsourcing? And separately, and I think maybe I'm getting a little bit ahead of myself, but can we perhaps talk about also the defense and the military side because defense is an area, as you guys know better than we do, that does not require an [ FAA ] if an opportunity to maybe commercialize certifications.

So I'll take that one first. We are the core business certified the electric aircraft, the hybrid is a fast follower. It will be certified in '29. So it's not going to accelerate but that's fine. We're comfortable with that. In terms of where we're at and with what we do and what's pushing outside, we're an integrator. We're working with the best Tier 1 suppliers in the world. aerospace ready, they know how to certified. That's how we're approaching this, and it's 1 of the things that sets us apart. But the aircraft you've seen flying is 90-plus percent representative of the final aircraft in terms of the technology. It's got Honeywell flight control system on it, for example. This is why the derisk from a technical and certification perspective is so enormous 20 seconds, and it's done. We basically lock it down, finalized some design components and off we go. So thank you. I think gentlemen on the end, as [indiscernible] up from the start.

So a couple of questions. One, I understand the $700 million is in addition [indiscernible] and I kind of like to understand what you've spent to this date. And then two, I would really like to understand a little bit more about why you are so confident in that number. I think like -- especially on things with like certification time lines and money spent like when there's this room covered the [indiscernible] for a while, like those provinces are almost never kept. So I would like to understand what you guys are thinking about. Why you feel like you have good line of sight to making sure that you will [ complete ] that number as like you said is quite different than what there was a projected?

Yes. I think that's because we know what we're doing. As I said, we are industry leading in understanding what we are doing and how you do it to bring it to certification. So I reset the time line last year. We've hit every single milestone, no single reset. We will not be resetting. We will certify in '28. And the 700 that's going forward.

[indiscernible].

So I don't want to give you a number because I'll probably get it plus minus a bit wrong. But it's -- the way to look at it is we sat here today, it's less than 700 going forward, right? As Domhnal said, that's close to what some of our peers spend in a year, right? But we have clarity, it's underpinned. The reason I'm certain is manufacturing got those contracts in place. All the build costs or the engineering, 75% are either contracted or quoted. It can't be that wrong. And with Patrick's support on SC-VTOL, as he explained, this minimizes the chance of late surprises. There may be one, but relative to everyone else, we don't have to go to the Middle East, right? We're certifying here. In Europe, we're going to deliver an aircraft that can fly in every single market in the world in 2028. Hopefully, that answers it. I think Savi, I think, and then we'll come to the front row.

Savi Syth, Raymond James. Maybe a question for Patrick. On the certification front, I thought because SC-VTOL is so spelled out, there aren't surprises, but I was kind of surprised to hear about [ glolicopters ] experience. I wonder if you could talk about what you've seen at other eVTOL or manufacturers that they haven't made it there and what specifically Vertical is doing that's different? And maybe a quick question for after that is just what you mentioned 75% that's contracted as tiers with the other 25% was as well.

Yes. Patrick, do you want to go?

So I'm not sure I would be allowed to go into the specifics of each and every failure. What happened as far as I know, because I was no longer in EASA when it happened, with located that they had to make a major change of design 3 months before the expected TC certificate date involve which makes it extremely difficult, extremely difficult. And that's what we have seen so far, when you as a certification authority -- when after as Stuart rightly said, there is a critical moment in the certification process, which is the so-called CDR critical design review, where all the design is frozen, so you don't change. If you see that after that date, the design is still fluctuating. That's usually not a good sign. Because it means that the models which were used for the design [indiscernible] enough. And usually, it provides you with a good sign, but there will be difficulties in the future.

And when you're asking 75%, including every major components at airframe, flight controls, PPUs, either contracted or quoted. So we haven't done the titanium bolts we need. I haven't done the [indiscernible]. So I haven't done the covers for the seat. I mean it's that kind of level every single thing major component is under contract or quoted. Hopefully, that answers it. Andreas. I think this is probably the last one then, I think, time we need to give everyone a break. We have plenty more time for Q&A at the end. Austin.

Austin Moeller, Canaccord. [Audio Gap] that you plan to have for aircraft and [indiscernible] that in Q1 in June, and I saw the gas engine that you were working on at the Vertical Energy Center. Just to clarify, is that the one that you're putting in aircraft 3 or are you still sourcing an alternative engine to be the part of the hybrid powertrain for aircraft 3?

We've got 3 options on the gas turbine engine and it will be a gas turbine engine in aircraft 3, not the one you saw or the combustion engine. And it won't be Q1, but the way, it will be year, we'll have the hybrid flying.

Okay. And just a follow-up. When you talk about 25% of the 2035 revenues being for the batteries, are you planning to service the batteries for the planes either at third-party MRO shops or will you be like shipping maintenance kits from the VEC to other MRO shops? Or would you be operating your own at different sites throughout Europe?

The hypothesis at the minute is we'd outsource the operation of the MRO because the way you make the money is actually supplying the battery. We don't need old facilities and employee fitters down the line. the optimum is we've designed the battery, they need a new 1 every year. We sell that to them. That's where the margin opportunity is. So hopefully, that makes sense. Thank you very much for questions. Thank you, everyone, for the questions [Audio Gap] about 7 minutes, if we could all be back in here. Thank you very much. [Break]

Okay. We're going to try and get started because we want to finish on time. I'm just going to round people up in the coffee. Whilst we're waiting for the room to fill up, I wanted to address a question. I was getting a sense that people don't believe the $700 million, okay? And that's fine. So I want to try and give you a strategic framework to think about it. When we started thinking about how we wanted to run this business 4 or 5 years ago, we made a decision at the time that we would run an outsourced Tier 1 model that we would partner with the Honeywells and the Acituriis securities of this world. Our competitors at the time made a decision that they wanted to vertically integrate. And the rationale for the decision at the time was they felt that they could innovate faster and there's a logic to that. The downside of that strategy is it costs a lot of money. If you think about -- we've got 400 people on staff, some of our U.S. competitors have 2 or 3x that. And what we found in the last -- particularly the last 2 years is that our Tier 1 suppliers are as nimble and as adaptable in their ability to innovate, as I can imagine. Honeywell being an excellent example. The second is we're based in the U.K. an aerospace engineer in the U.K. costs 6% lower than the same aerospace engineer with the same experience in California. That's just a fact. So how do we get to these lower numbers we have less people on staff at a lower price point. That's how you get to the number. So I think it's important as people go to think about that, that's the rigor of the -- ultimately, the $700 million. Now it's a thrill for me to welcome a former colleague of mine back. Jim Morrison, who's the Chief Risk Officer of [ Avalon]. Avalon is my baby. It's a company that I started in 2010. And today, if not the second largest, maybe it's the third largest, it's big, Jim, right? It's big. Jim is responsible for the implementation oversight and the continued development of Avalon's risk management strategy and ultimately positioning Avalon for success. Jim as part of the team that worked with me 4 or 5 years ago when we started to look at electric aircraft life and whether [ Avalon ] should take a position in that marketplace. So I know he's as passionate as I am about aviation in general. He's an MIT graduate, and one of the most amazing colleagues that I ever had the opportunity to work with. So will you join your hands and welcome Jim Morrison, Chief Risk Officer of Avalon to the stage. Thank you.

All right. Thank you very much for the introduction. Domhnal. It's a pleasure to be here, and this is always a project and a product that we're very passionate about at Avalon. So Domhnal will already introduce me. I do have oversight at [ Avalon ] on our clean tech projects on our sustainability agenda and thinking forward into the future about how we position our portfolio, our capital to be able to drive strong returns into the future. So a lot of what I do with my team is actually thinking about what's the next trend around the corner. So in this presentation, I want to cover 4 things. First, who is Avalon. Second, I want to speak a bit about why we chose the VX4 and Vertical to partner with when we entered the space back in 2021. Third, I want to share some learnings that we've had over the last 4 years from our joint working groups. And then fourthly, I want to talk about why we remain committed to this product. Even 4 years later, after evaluating 2 dozen other [ AAM ] clean tech programs that are available around the world. So to get into it. I have about 7 slides to go through. So first, who is Avalon. We're a top 3 aircraft leasing company in the world. And today, in large commercial aircraft, about half of all aircraft are leased airlines own on balance sheet, about half of their fleets, and they lease from third parties about half of their fleet as well, too. Avalon, and today, we have about around 540 aircraft that are delivered that we're leasing to airlines around the world, we have 142 different airline customers. We're operating in 60-plus different countries, and we have one of the world's largest order books of committed aircraft to deliver from today out to 2033. So over 530 aircraft that we have on order with Airbus and Boeing to deliver. So that positions us uniquely amongst our leasing peers with both the depth into our customers' markets as well as the scale of our operations. One of the things we're very proud at Avalon is being forward-thinking about thinking what is that next trend. We were the launch customer for an A320neo family aircraft back in 2012, 737 MAX aircraft from Boeing in 2012, A330neos in 2014 as well as the VX4 back in 2021. So we're constantly looking for what is the next innovative strategy that will change the game. 0 Now I want to step back and think about some of the trends that we're seeing today from our airline customers around the world. And last decade, when we saw airlines passenger booking trends. You think as a passenger, buying a ticket on an airline, you'd be thinking about the schedule and the price. Does the airline get me to where I want to go at the price that I want to pay? Today, that's changed. There's been a shift in consumer demand, and we're seeing it in our customers, both here in the U.S. and around the world. That shift is passengers are more and more focused on what is that experience that they have and what's the impact that they have to their travel as well, too. So some data to support that trend. On the left-hand side here, we have revenue trends, the revenue growth quarter-over-quarter for full-service carriers in the U.S. network carriers versus low-cost carriers. For the last 6 quarters, network carriers have been out driving -- outgrowing the revenues of low-cost carriers. Now that's not just a U.S. trend. The other side of the chart, the right-hand side shows from the last 6 years, ultimately, premium passenger travel, business passenger fares have been growing faster than economy, low-cost travel fairs as well has been a stronger market for airlines to sell into. So why do I bring that up? Because there is a trend here where airlines need to find ways to generate higher revenues to differentiate the product. And we believe that eVTOL is a way for airlines around the world of all different business models, to be able to provide a differentiated service to their customers. And we're seeing that happen as forward-thinking airlines are thinking about how can they have a broader experience with their passengers that starts closer to their home, closer to the work and it's not just airport to airport. So eVTOL is a way for airlines to find new monetary opportunities. So back in 2021, why did Avalon choose Vertical? So there's about 6 reasons up here on the slide that I'll go through now. So the first one is that we did due diligence. We looked around the market, what are the opportunities to invest in when it comes to AAM space. What are the different clean tech vehicles in which could attract our capital and our focus? Vertical scored the highest on our scorecard and ultimately attracted both our investments in their pipe back in 2021 as well as a commitment for 500 aircraft at that point in time. The second point I want to bring up is about what our airlines were asking for. And our airlines are asking for revolutionary technology that changes their cost curve that allows them to fly with a lower environmental impact and that adapts their network. When we look around the world right now, unfortunately, there's not a zero-emission regional aircraft or a narrow-body aircraft that could plug into a mainline airlines carriers. That pass the battery limitations, the certificate certification limitations that are present today. We believe that eVTOLs will be the first aircraft that enable airlines to expand their networks, expand their [ catchment ] areas and evolve their business model and will be a stepping stone as we continue to innovate within aerospace over the next 2 decades. Third reason, Patrick spoke very clearly about this one. The need for certification standards that allow an asset to be mobile and portable around the world. So the fact that vertical is certifying under the EASA regime with the [ U.K. CAA ] is critical to our business model. As an aircraft lessor, we're focused on transitioning aircraft from one market to another and to be able to market those assets to airlines globally, customers globally. So having a certification standard that will be the global standard is critical to our business. I'll talk about that collaboration with industry partners that Domhnal just mentioned, instead of being a vertically integrated company, Vertical is thinking about those key partnerships that they bring in other resources into their certification process that both derisks the certification makes it cost effective, but it aligns the interest of both the supply chain and the customers that is more likely to have success into the future. That was a key reason for us for selecting Vertical. That vested interest of partners complements our business model and ensures that we drive to success into the future. And the final reason on this slide is ultimately that we believe the VX4 is a differentiated product. It's a product that has a largest cabin in the sector. It's also a product that has demonstrated its first utility with applications within special missions within a hybrid configuration and really the 6 passenger option within the cabin is a huge differentiator. If you're looking to be able to produce capacity that is available to the masses that has the lowest unit operating cost that enables fares to drive a broader market opportunity with this aircraft is certified and in operating service. So when we launched this program back in 2021 with Vertical, this was our fastest placement program of all time. So I spoke about Avalon as a launch customer for multiple aircraft programs throughout its history. Within 8 months, we fully placed out 800 -- excuse me, 500 aircraft with partners around the world. Generally, when we go to place a new aircraft order, it will take 3 to 7 years before we actually ultimately place those aircraft with our customers around the world. And we did so with a variety of airlines on continents all over the world. As well as with different business models, both full-service carriers, such as Japan Airlines, as well as low-cost carriers, such as [ GOL ] in Brazil, Air Asia and Southeast Asia as well, too. It demonstrates the interest that we have found in our customer base around the world to innovate business models to expand the revenue base and ultimately to open new market opportunities. So once place these aircraft back in 2021, 2022, we needed to understand what is the business case that will drive the most value for our customers and for Avalon because we are creating new markets here. This is a new technology that enables new ecosystems that we need to learn together about what is the investment case. So we quickly launched joint working groups with each of the customers in which we placed our aircraft with. So I want to speak to you about high-level learnings from 2 of those joint working groups. The first is with [ GOL ] in Brazil, and the second is with Japan Airlines to give you a bit of a spread of the different business models. So [ GOL ] is a strong customer of Avalon. We've done business with them on the 737-800, the 737 MAX aircraft from the past as well, too. To launch a program with a trusted partner on the VX4 was very exciting for us. The first market that we looked at for the VX4 was in Sao Paulo. So you think of Sao Paulo, an urban area that has 20 million residents in it, a large sprawl with multi-airport system as well as high levels of traffic congestion within that urban area as well, too. So for example, to get from the Central Business District in Sao Paulo out to the international airport can take on average more than 60 minutes, 67, 68 minutes by our own research. That flight time is 11 minutes. Now the bigger issue in Sao Paulo is the uncertainty around that traffic. So maybe on average, it takes 67 minutes. But sometimes it can take multiples of that. So if you're an airline passenger and you've ever had to fight the traffic in Brazil to get to the airport, you're leaving extra time to be able to get there. So to derisk that actually offers a really differentiated product for passengers who are looking for -- willing to pay a premium price but also are looking for a different experience as well, too. What we found in Sao Paulo is that it's also the largest helicopter market in the world. So today, there's 400 helicopters that are registered in state of Sao Paulo. So that means that the infrastructure is actually largely already in place. The opportunity with eVTOL is to invest in chartering stations to adapt infrastructure to enable passengers to access it, as well as to clear the way for branding and that passenger experience from the ground to the flight. So with an eVTOL from door to door, you can take what is a 60- or 70-minute travel time and break that down to half of that time for 30 minutes, if you still account for the road transport, the [indiscernible] and up to the sky. So next example I'll bring up is Japan Airlines in a leading full service carrier in Japan. Japan Airlines is an innovative, thoughtful airline that's thinking about the future. It's thinking about how to leverage innovation technology in a very unique market, which drives a fairly a large portion of premium travel as well, too. So Japan Airlines, we placed 100 aircraft back in 2022, and we were focusing first in our joint working group on the region around Osaka. So in Osaka, there's about 19 million residents in that broader metropolitan area prefecture. There's multiple cities. [indiscernible] are very close by within a 50-kilometer radius. There's also multiple airports that Japan Airlines had interest in serving. And this year, Osaka is hosting the [ World fare ] as well, too, which means has heightened the level of infrastructure investment, investment in tourists as well too. So what we learned in that region is that there's opportunities to both attract premium passengers as well as connect tourist attractions throughout the broader region and significantly cut down on travel times. Throughout Japan, there's broader opportunities within other urban areas, Tokyo, but as well as in the North to [ Connect Mountains], which are disparate geographically dispersed as well as in the South, where many islands are connected only by ferries. So there's many different use cases that we were able to find within the strong working group. So my last slide that I want to bring up is about, so why do we remain committed to vertical and VX4 after 4 years of doing both joint working groups in each -- each of our customers but as well as doing evaluations of hybrid aircraft, hydrogen-powered aircraft, of other battery electric aircraft as well, too. Well, it's ultimately because of the value creation opportunities across the ecosystem. So EV tools will enable new ways of doing businesses. Both on the ground when we think about the [ vertiports ] and the infrastructure that's required, the charging stations in the air, the aircraft as well as the services opportunities that come with this new ecosystem, too. Whether that's through batteries, but as well as maintenance repair and overhaul too. And finally, the opportunities provide financing throughout that broader ecosystem. So at Avalon, we remain very excited about this opportunity. We're looking forward to our customers flying first revenue services in 2028, 2029. And ultimately, this is an opportunity that we remain committed to. So thank you very much for the time, and I'll pass the mic back to Domhnal.

So we're just going to get a couple of seats on the stage. But again, I ask you to think about Vertical Aerospace and think about the differentiators at a strategic level. If an aircraft program is to be successful today, it has to have a top-tier aircraft lessor supporting the program. None of our competitors, not one is a top-tier aircraft lessor as a customer. That is telling. And having the distribution capability that Avalon has globally, it's the same strategy as I was partnering with OEMs on the Tier 1. When you have Tier 1 lessor spreading the news in the gospel globally, it's a very powerful messaging system. And I'm delighted that Avalon has continued to be at the forefront of the [ cheerleader ] for this asset class. Now you rarely get a chance to introduce and welcome one of the true aviation entrepreneurs of the world genuinely. If you do the step back and you look at the great airlines of the world, very few that would take the time to get on an airplane from Kuala Lumpur and flying 19 hours to come to a Capital Markets Day in the Palace Hotel. And the reason, [ Tony ] Fernandes has done that is because he, first of all, is a great friend of mine. He was one of the first globally to see the future with respect to the VX4. But most importantly, he reflects the possibilities and the potential for this aircraft in Asia, which is the fastest-growing aviation market in the world. Think about in Asia, [Audio Gap] he's our side chatting, where are you, Savi? There you are. I think she's equally thrilled to have the opportunity to meet with Tony. So would you all put your hands together and welcome [ Savi ] and [ Tony ] to the stage.

All right. I'd like to add a few words to what Domhlan just said in terms of kind of setting the stage for what kind of Tony has achieved over the years. For those not familiar, Tony and his partner bought Air Asia back in 2001. And they took an unprofitable airline and turned it into a profitable one within a year of converting it into a low-cost airline, taking the models that you've seen at Southwest and Ryanair and really adapting it to Asia. And as Domhlan mentioned, it started with 2 aircraft and now we're up to over 250 fleet. So kind of a formidable competitor in that space. And what's interesting is that they've been named the world's best low-cost airline by [ Skytrax ] for the last 16 years in a row, which is a great achievement on that front as well. So and Air Asia kind of leads in other fronts as well. There is technology and logistics where they've been excited to have this opportunity to [Audio Gap] He has a reputation from [Audio Gap] what do you think? So Tony, thank you.

What we'd love to hear from you, what we all would love to understand is just how do you envision eVTOL with the role that eVTOLs play in Asia and within Air Asia, particularly?

Yes. Maybe just before we do that, just to set the scene in Southeast Asia and ourselves. We had a phenomenal growth we went through, and it's pretty difficult because we were competing against government on airlines, that were subsidized and in some cases, had no interest in making money. So we were able to grow. We have a fantastic order book. And then COVID came along. And so were grounded. We lost $10 billion of revenue in that period. We didn't get any support from the government or any government in Southeast Asia. And we innovated to create 6 companies from our airline assets called Capital A, which go from logistics to digital assets through MROs, et cetera. And so that innovation has been very much in our DNA. It enabled us to survive. We're now back flying our aircraft. We had a record quarter last quarter. And so we're always looking for where do we go next. When Domhnal and Vertical approached us coming from our part of the world. And the growth is phenomenal. We went from 2 planes to [Audio Gap] [indiscernible]. And that growth came from really second cities, connecting secretary cities or secondary cities, tertiary cities. We are the largest foreign airline to China, the largest foreign airline to India. And so when eVTOLs came along and we saw what was there? It is in a low-cost product at the moment. I believe it will evolve and there's other versions being made. Of course, we push Vertical to say put more seats. We want night flying, et cetera. But with our experience and looking at the market and how we connect the secondary and tertiary cities, there's a whole lot of constraints in Southeast Asia, which opens up a massive the opportunities there in the first instance, it's a higher end market than Air Asia. And as Domhnal mentioned, we did democratize line by bringing people in. People have left us and gone on to premium airlines. So this is an evolutionary thing, and that's going to happen with the eVTOLs. And what happened during COVID we had no choice but to go into logistics. And in 3 years, we went from 0 to -- we just overtook Singapore Airlines as the number 1 we see a monstrous opportunity also in the logistics field. So it's exciting. It's a long journey. The resilience shown by Vertical is phenomenal, and we are firm believers. How we would structure this eVTOLs is not within the AirAsia Group or within our other group capital and probably set up a different division to do this because it is a truly low cost at the moment and create a pan-Asian eVTOL company that could be separately listed at some point. But using the DNA of what we've got, the 6 companies we've built in capital [indiscernible] all of efficiency, all about inclusivity and having great people but bringing that into this eVTOL company that we're looking at setting up and attacking a new market, which we've generally been good at, and we think the market opportunity is massive.

That was a lot in that's super interesting. So maybe like how do you see it starting early days? Is this second -- between secondary cities to airports?

Well, no. If you take some of the capital cities in my playground call Kuala Lumpur, Jakarta or Bangkok. Within a sphere of 1 hour, what could -- should be a 1-hour journey because of [Audio Gap] taking people from airports or capital cities traditionally would have taken much longer to take by car, value of money compensates for the fare they're going to pay.

That sounds --

So you think of all the capital -- just before even secondary cities. You've got Jakarta, [Audio Gap] a potentially 2.5 hours, which would be butchered by in a positive way, eVTOL.

Looking forward to that. Let's talk about -- you've kind of talked about Domhnal and the VX being brought to you. Like what attracted to you? You're a smart guy, you probably looked at what other opportunities there are. Like what attracted you to the VX aircraft?

Well, the [indiscernible] from the music business. I knew nothing about aircraft. I actually spectacularly resigned not far from here 75 Rockefeller when the AOL merger was announced. I went through 3 mergers at Warner Communications, they came Time Warner, where they created EBITDA, earnings before everything you don't like. And then cash flow, what about the [Audio Gap] airline. That's still that brilliance versus stupidity is still in judgment call right now. And so -- but I met Domhnal Slattery, so that's a big plus. And -- but what attracted me, I mean I knew nothing about airlines or running an airline. But I was like, well, if I could bring the cost down, I have a population of 3 billion potentially in my playground and I can create a new market. That's the same feeling I have when done in New York, actually at the [indiscernible] Club presented me this idea, and I thought, wow, I love [ Blue Ocean], I love creating new things. And I just instantly -- I look at the market potential when I look at starting a new business, and I saw a massive market potential and we had the added advantage of having run an efficient airline this time.

Makes sense. Was there anything on kind of the when you talk to and provide feedback on the VX4, like what you'd like to see?

Well, we -- I mean, because of our low-cost DNA, and this isn't a low-cost product at the moment, but we still want it to be as affordable as possible, right? So I mean, I know the engineers -- these are difficult things, but we would love more seats for instance. And I'm sure new versions will have that. We want to fly the aircraft as much as possible. AirAsia flies our A320 is 14 hours. Airbus will certify that's the most of any airline. And that enables us to have a lower cost per seat because we have more trips. And so we talked about night flying as well. The peak times in Asia are at 7:30 night traffic is -- you can be in a grid lock and early morning. And I've just talked to you about Southeast Asia, by the way. I haven't talked about Korea, in Japan and China or in India, I mean the potential for eVTOLs is massive. So yes, I'm just looking at it from my experience. Even though it's a premium product, I want it to be as affordable as possible. And so those are the kind of things we were talking about. And understanding battery technology, the efficiency of how often you would charge and removing batteries, what were the most effective ways. And then for us, our biggest -- we have partners and airports, right? And I mean, we've had a tough time with airports in our part of the world because they're generally government-owned. Recently, [ GIP ] stroke BlackRock bought Malaysian airports and our integration. And that's transformed my business because you got a private business who sees us as a massive customer and wants us to do more. And in 6 months, we've achieved a lot. So that was a concern of mine and the way the aircraft operates. It's a much simpler operation to have landing fields and adopter basically. So there's lots of readily available sites. The next point is how do we manage air traffic control flies at a height that doesn't require the stringent [Audio Gap] all the Asian regulators, obviously, FAA and then [indiscernible] it becomes easier in our part of the world. But it's a first of kind and regulators are generally risk-averse. And that's going to be the biggest and why I'm optimistic is because -- they've gone a long way. They have regulators on their board who understand the challenges. But I think that's it's first in kind. And regulators are risk averse and as they should be. We have enough incidences out there. So for us, as a commercial operator, we're raring to go, we need to be in a position to go. And I think we can scale up very quickly once the regulations are in place, et cetera.

Last question, and this is a great kind of conversation we're having, and I really appreciate your time. But -- in terms of sort of regulatory acceptance or even customer acceptance, how do you feel that part of the [ staff area ] will kind of evolve? Do we need to see it elsewhere before on?

Yes. I am less worried about that. Let's talk a customer. I think, again, when I started flying at the fairs that we had, which were generally about 5% to 6% lower than the national carriers. I think there was a lot of who's this guy for the [ easy ] business? Is it safe? Am I going to sit next to a chicken? Do we have to carry my bags to the plane, et cetera, then I sponsored Manchester United and all things changed. Very painful for me because I hate that football club, but you have to sell yourself to the devil once in a while. And so we've carried 1 billion people. Generally, most of whom never flown before. And so put a good product out there, price it appropriately. The customer acceptance will be there. It was the best marketing comes from the people who are flowing the product when they say I've done this. So customer, I'm not worried about because for vertical to get approved, it's going to have to go through a lot and proven safety, et cetera, et cetera. So I'm very clear about that. In terms of regulators, in my part of all, obviously, if it's [indiscernible] [ FAA ] have accepted it, then it's going to be a lot easier coming into our port. But I think the more important thing is customer acceptance with a lot of people will be saying, do they think they're safe. But then you have the helicopter population, which has its major pluses and has major issues as well. So I'm not worried about it at all because that was the first thing people say, "Oh, I'm not going to go on that, et cetera, et cetera." I don't think that's an issue at all. And Vertical will have to do a lot of work regulation side. And that will assist customers such as us to go-to-market issue is they have [Audio Gap] when Vertical give us the aircraft or eVTOL.

For investors, maybe to wrap it up, like what do you think we should be asking, we should be paying attention as we look to this industry that your focus?

Well, I think the market is there, right. The cost -- and what is the revenue -- what is the demand versus the price you're going to charge is going to be key in my mind. Obviously, the product, there's stuff to be done still. I think it's some big days coming up. And obviously, we've been following it very closely because we're excited. And then the regulations, which we've talked a lot about, right? I think investors need to see 2 things. Can this generate positive cash flow, which originates from strong revenue and revenue growth, I think that's there. That's a given. Can we get the right cost structure, which I -- it appears to be able to be done in all parts of the world, not just New York. And Again, the yes, that's it, demand, price, good product because by the time you get there, it has to pass the regulators anyway. And finally, investors should also look at AirAsia and [ Capital] [indiscernible] since I -- that's why I came 22 hours just to that. you very much, everyone.

Okay. Thank you, Tony. Thank you, Savi. We're into the last trimester. As Patrick mentioned in his remarks, ultimately, in OEM is in the business of building and designing an aircraft and what that means you need the absolute best brains in the world [indiscernible] aerospace engineering faculty. And unquestionably, at Vertical, we believe that we have that in the U.K. But right at the top of that pyramid are 2 individuals who are recognized globally as simply the best of the best. Now they couldn't be here today. So just checking if this side of the house is still live. But I'm going to invite these 2 guys on the stage, [ Michael Trevena and David King]. Guys, if you just come up well I'll give a brief background on you two. Michael is our Chief Commercial and Strategy Officer, and David is our Chief Engineer. He is affectionately known -- this is David. This is Michael. They'll introduce themselves in a second. David is the father of the airplane, and he is ultimately responsible to get this aircraft engineered to a point at which it will be safely certified. He has spent over 30 years in the aerospace industry. He is what we affectionately call an aero sexual. You're alive. Good. He set a stellar career at [ Leonardo at Bell helicopters ] and at Boeing. And he was the Chief Engineer on the [ AW609], which is set to be the first new category aircraft to be certified in over 50 years. That was David's airplane. [ Mico Trevena ] joined Vertical in 2019. We had hunted Michael from Rolls-Royce, where he was Head of Future Business Technology. So his job was to think around the corner, like what's next? No blinding glimpses of the obvious for Mr. [ Cravenka]. And so he has been key to our story over the last 6 years, central to our strategy and now is the voice of vertical to our customers globally. So put your hands together with these 2 individuals, Michael and David.

Thank you, Domhnal. Always challenging to follow that, have you compete. Anyway, [indiscernible] engineer, so I certainly can't compete with the Irish sense of humor, but it's really great to have you all here. As Domhnal said, I've spent nearly 3 decades now, really at the cutting edge of propulsion. And if you step back and think about it, I think Stuart and Domhnal has touched on this, we're seeing the first disruption in aviation since the dawn of the jet age. And if you step back a level, what disrupts vehicles, transportation, it almost always comes from a disruption in the powertrain. So I've spent 3 decades pretty much right at the cutting edge of propulsion systems for aviation. I'm an aeronautical engineer. And about 10 years ago, as Domhnal said, I started working on future technologies reporting to the group CTO. And at that point, I saw we were reaching this tipping point where lightweight batteries, motors, composites, flavor systems. We're just going to completely open up a new type of vehicle. Against the [indiscernible] of the Rolls Roy CEO, I decided to take one heck of a punch and joined Vertical when they had, I think, 42 people. some seriously smart engineers. If David is the father of the aircraft, I'm possibly the grandfather because we certainly inherited something interesting, but it's been one hell of a ride. And central to all of that is the battery system. I think one of the questions earlier was what does Vertical do? We do the whole aircraft, we do the propeller design, but fundamentally, we also do the battery. And I think it's a key bit of the story that we don't tell often enough. Actually, we've had lots of people come and see us. And I think we are absolutely world class in the batteries that we do. And I want to really just in the next few minutes, and I haven't got long, just talk to you a bit about why the factory is so important. It's not just a component. It's fundamental to the game-changing performance of the aircraft. And it's really our margin growth and our platform for growth for the company. So if we step back, what the batteries have to do? They really have to excel in 3 areas. Firstly, they've got to achieve the highest levels of safety in aerospace. Secondly, they must deliver exceptional performance and eVTOLs are particularly demanding in terms of what they require from the battery system. And finally, that's no good unless they're commercially viable. And our battery system delivers on all 3 fronts, and I'm going to try and bring that to life for you. So starting with safety, and we deliberately always talk about safety first. That is fundamental to the culture and the DNA of the company. So as David will talk from an aircraft point of view, but also from a battery point of view, aviation batteries have to be safe under all expected and unexpected conditions in flight and on the ground. And across the entire eVTOL industry, we're the only company developing batteries to this airline level of safety, what we call category enhanced. That is not just one in 1 billion failure rate. That is effectively multiple layers of protection, for example, against things like thermal runaway and the highest levels of safety in all of the electronic hardware and software. This is airline levels of safety. To underpin that, we've conducted around about 200 thermal runaway tests. We've done multiple 50-foot drop tests. And we've really pushed our batteries through all manner of abuse tests, environmental tests, vibration, electromagnetic tests, lightning strikes and all sorts of other tests. As Patrick, I think, really brought to life earlier, it's no good doing that unless you also know what rules you need to meet. And we've heard about the major advantages that [indiscernible] has. It's taken this consultative approach. And actually, there was a European working group, we happen to chair it. It's got all the best across the whole industry that for many years, has been defining the exact battery regulations that we need to meet. So we're certain about the safety of the batteries because we've tested it and we're certain about the regulations that we need to meet. So this isn't just some purpose EV pack. It's an aviation battery proven pack with the kinds of tests that the regulators expect. So safety. Next is performance. Of course, the safe battery is no use unless it can deliver the required performance and eVTOLs, as I mentioned, are particularly demanding. So they have very high power in takeoff. They need an efficient crews, and then actually the most difficult bit is then to manage a high-power landing with all of the safety reserves that you need. Batteries, of course, form a significant part of an eVTOLs weight. And unlike fuel, unfortunately, they don't get any lighter as you go through your mission. So every single pound of weight that we can scrape off the battery fundamentally enables us to offer greater payload, greater performance to our customers. We're targeting a battery system with over 200-watt hours per kilogram at entry in service. There's lots of numbers banded about, but the important bit I want you to take away is that is for the entire system, everything you see on the chart. That includes all of the battery management systems, the thermal management systems, all of the structural integrity and actually also the high-voltage protection systems that isolate the battery from the rest of the vehicle if needed. Our packs integrate the latest cylindrical cells that are already in mass manufacturer. And that's really important in terms of the proven manufacturing quality and safety and cost. And those cells really combine high power, low impedance and fast charging. And just to give you a sense, I think you heard a bit and David is going to talk a lot more about just some of the rigor we've had to go through in the flight testing. But we've already done over 5 million hours of cell testing. So we really understand how these cells perform. Within our 3 generations of battery tests, we've conducted countless design, manufacture test iterations at all levels, driving weight out whilst delivering that mechanical integrity, the ability for the battery to withstand shocks and vibrations. And we've built a deep technology mode through the thousands upon thousands of interrelated tweaks and improvements with an unbelievable level of attention to detail. I remember once a story actually where we were looking at how do we drill a hole out of a titanium bulk to get some weight out of it. That is the kind of attention to detail you need to deliver this sort of level of performance. And you can see that reflected on the chart in some of the improvements that we've seen. So we believe we're developing the highest performance batteries that safely unlock the VX4's disruptive capabilities. Of course, all of that, and we've touched throughout this -- none of this happens without the people. And they're really the special source. We've built crucial technology moats over many years, certainly over the 6 years I've been at the company, and it's all really down to the amazingly talented and skilled people that we've got. We've got a really best-in-class team. We've got about 60 people very focused. But if you look at their backgrounds, they're alumni from McLaren, the former Head of Batteries at the European Space Agency Jaguar Land Rover, Airbus, Rolls-Royce, Dyson. We've partnered with some of the world's leading academic institutions, including Oxford University. And we're deliberately combining this mix of cross-sector battery know-how with deep aerospace certification and safety expertise. That's the caliber of people you need to develop this kind of technology. And we've also put them in a really innovative environment. And one of the reasons I left an incumbent Tier 1 to come and join vertical was I fundamentally felt that at a platform level and a battery level, it took a different culture to develop and iterate at the rate we're doing. So this team innovates in our dedicated, what we call Vertical Energy Center or VEC. And it brings all of that design assembly testing into one place. And that just speeds up the pace of iteration. It unlocks the critical rapid learning cycles that we call [ Alpha ] to [ Epsilon]. And these iterations gradually introduce additional levels of aerospace, process control and manufacturing control as we progress through every major generation. So our edge is not just a pack. It's an organization and a culture that can iterate fast with safety in mind from day 1. And finally, to talk about the commercial viability of the business opportunity. So on the commercial viability, as I've said, we've done millions of hours of testing, and that's enabled us to optimize things like the battery life, fast charging. So if you're doing short flights, the turnaround time is fundamental Tony talked about how many flights are you doing a day, you've got to keep the aircraft in the air. Our batteries are also designed for refurbishment. And I think this is something that's quite unique in the industry. So we can reuse the high-value aerospace grade composite casings, electronics to improve the economics. And then the internal battery cell modules have got multiple second-life use cases. And with the unrivaled upgrade is the aircraft that David is also going to talk about, the VX4 is quite simply going to get better and better. We're not only developing world-leading batteries for entry in service. We've embedded the capabilities to rapidly certify higher-performance battery packs as new cells become available. This enables the customers the flexibility of increasing speed and range, or increasing the number of passengers from 4 to 5 to 6, offering the kind of game-changing operator economics that our customers are looking for. So that's the commercial viability. And then if we just talk about the business model, the best analogy I can think of for our aircraft and the battery is the equivalent of a profitable razor and razor blade economics. Batteries are replaced annually or more frequently depending on utilization. And that creates a recurring revenue stream with 40% gross margins trending to around the 70%, 30% revenue mix, as Stuart talked about earlier. So batteries are our annuity, if you like. Aircraft deliveries generate battery replacements and generate upgrades. So this locks in long-term commercial value. And we can also uniquely benefit from the wider technology [ trickle lapse ] as aerospace electrifies. So eVTOLs one of the reasons I joined Vertical. I passionately felt that eVTOLs were going to be the first mass opportunity for electrification. But over time, those same technologies are going to trickle up into the wider aerospace, both in defense and civil. And we're the only eVTOL OEM developing batteries to airline levels of safety. So with that, it's impossible for me to do justice to our batteries today. We are going to release a white paper later this year to dive a bit deeper. But just to close, we have a certifiable high-power battery design for eVTOL. We have a team and a facility built to iterate quickly and safely. And we have a model that turns technology leadership into durable recurring value. We're not just building an aircraft. We're building the battery business that powers it and much more. Thank you very much. And with that, I have an absolute pleasure to hand over to David King.

Thank you, Michael, and thank you, Donald, for the introduction. Well, you probably won't take you long to figure out that I'm a bit different, so I'll just go ahead and [ compass ] it upfront. I'm one of the few Americans on the Vertical team. So it was, I think, a little before 3 years ago, that I met Michael and decided to pack up my stuff and move across the ocean from Philadelphia to Bristol, England. And at the time, as Domhnal explained, I had spent 3 decades working at the big vertical lift OEMs, the [ Enardo, Bell, Boeing]. And that included 15 years as a chief engineer designing, testing and certifying new types of vertical lift aircraft. Now I didn't move to England because of the weather. And at the time, I left an incumbent that had a $17 billion production backlog to join a relative start-up company that was pre-revenue. So I joined vertical because engineering Vertical lift is my life's work. It's my passion, and I believe that vertical Aerospace is best positioned for the future of vertical lift, and here's why. So take a look at the VX4. What steps out, what jumps out at you first as a safety standard. Now you heard a lot about it before, and you're going to hear a lot about it again. And the reason you hear about it is because we hear about it. So when we query our customers and we say, what's the most important attribute in a new aircraft, unanimously it's safety. So we are designing the VX4 to meet the same safety standard as commercial airliners. And as Patrick said earlier, commercial airliners is the safest way to travel statistically, by a lot. And that means you have to prove that your failure rate is less than $1 billion. Now I was asked the question during the break, and I heard this question before, is -- is it going to take you a long, long time and cost a whole lot of money to get to that 10 to the minus 9 that to the billion standard? And the answer is no, not if you do it upfront. So we've designed the VX4 upfront to have the architecture and the sizing to meet the airline or safety standard. We've designed it upfront to have a highly redundant distributed electric propulsion system so that there is no single failure point in the aircraft that is going to cause it to come down. And if during a flight, there are multiple failures that is in the realm of 1 billion, the aircraft will continue flying and land safely out of [ Verdiport]. You've got to build that in upfront. And then also, if you look at the VX4, you look at a structure, you'll see that it's designed to be robust. It's designed with crashworthiness built in. Now the crashworthiness criteria that we've defined is what Patrick talked about. The EASA team under Patrick's leadership put all that detailed criteria and all that means a compliance in the rules, in the means of compliance, so we have a clear path to compliance. So we've built that in up front. The VX4 is designed that it can withstand an emergency crash landing with a 12G impact either vertically or horizontally. And it can do that in a way that it gives the passengers every reasonable possibility to walk away safely. But you can't do that after the fact. You have to do that upfront and that's what's built in. So that's the #1 differentiator that VX4 jumps out. The second differentiator, which we've talked about earlier, and I wanted to highlight is the scalability and the versatility and that's built into the size of cabin and the power margin. And you can't build that in after the fact. And so if you look at what they can provide to a customer to an operator, it can provide the capability to provide multiple missions with one platform. It can be configured for 4 seats. It can evolve to 6 seats, as Tony talked about, because that would improve the cost per seat mile reduced it by 50%. And the operators, the cost per seat mile, the cost is extremely important to them, or it can evolve to an emergency medical services interior -- you have to build that in upfront, and that's why the VX-4 is well positioned. And for the reference, a 50% number that Domhnal talked about, I mean bigger airframe than the other 4 passenger vitals. So if you look at that from a passenger perspective, that's the difference between a Mercedes S-Class and a Chevy Cruise. And so being sized for scalability and versatility means the aircraft can evolve. It can evolve to add more seats, it can evolve for more missions. We've seen that in the helicopter business. You start with one model and then you evolve it and you can customize it. But it can also evolve to a hybrid derivative, which I'm going to talk about a little bit more. And it can evolve without a fundamental redesign of the airframe, which means the evolution is done cost effectively without a long recertification period required. The third key differentiator that really attracted me to vertical is exactly what Patrick tells us. And it's what the team has in place, what Michael and the team put in place here, and that's certification. And this attribute, I think, is fundamental to our value to you as an investment proposition. And it's also the key to us executing the Flightpath 2030 strategy that Stuart laid out earlier. So we know how to certify a new and novel aircraft to airline or standards. Because if you think about it, and in my 30 years in this business, designing and building a new aircraft and proving that it does what it's supposed to do is the easy part. The hard part is proving that, that aircraft continues to do what it's supposed to do. [indiscernible] land safely under any set of circumstances or environmental conditions that are within the probability of one in 1 billion. That's the hard part. And that's what you have to do to certify to airline or standards. And that's what we've put in place here at Vertical, the people, the process, the culture to be able to accomplish that. First step is we hired a lot of people that have done it before, people with experience certifying new aircraft, new systems to airliner standards. Then we teamed with a group of high certification pedigree Tier 1 aerospace suppliers, people that have done it before. So -- and this team knows how important it is to put together a detailed plan that captures best industry practices and does that upfront that gets into the predictability of the $700 million model that Stuart explained. The predictability is built into knowing exactly what you need to do, what criteria you need to meet and then using the prototypes and the flight test program that's going on now that you'll see in the videos and using that to validate our models and also using it to validate how we're going to show compliance to the certification rules. So having that crystal clear plant upfront is a key differentiator. And as Patrick explained, we're working side by side with both the U.K. and the CA and the European Union regulators to essentially do dry runs of the certification testing on our prototypes. And that allows us to build this trust, right? We talked about trust as a currency. It builds that trust between the regulator and the applicant and that allows us to go fast later. Now -- and I've been personally involved in certification programs of new and novel aircraft on both sides of the ocean. And because of that, because of that personal experience, I can say with confidence that the model that's been put in place in Europe by EASA and has been adopted by the United Kingdom [ CAA ] is the best fit for a new novel clean sheet type of aircraft? Here's just an example from my personal experience, working programs in the United States with the [ FAA]. Without the criteria, the means of compliances, as Patrick explained, being published, defined publicly vetted and approved upfront. As a certification applicant, you are essentially going at risk until the end. And I've had some experiences where you're pretty sure you have an agreement. And then within the authority, the engineer changes out. And the new engineer, by the time you have to sign the statement of compliance has a different perspective, and that can cause lots and lots of delays in headaches. So our team is going with a robust proven and streamlined certification process in the United Kingdom with the U.K. CAA working side by side with EASA. And now we're taking those 3 key differentiators in bringing it to a hybrid propulsion variant. Now the hybrid is not a departure for us. It is a natural evolution of our all-electric VX4 and the all-electric VX4, we see it as a perfect fit, and we're seeing that from our customers a perfect fit for point-to-point air mobility in and around densely populated areas. So the hybrid is a natural evolution in a way that it provides an extended operational range, and that will open up additional markets. And those markets will include defense. And it will include logistics, and it will include emergency medical services, right? The [ Golden Mile ] needs -- the golden hour needs an extended range. And it will also allow the aircraft to be used for point-to-point air mobility from city center to city center. So the VX4, as we mentioned, is one of the differentiators with sized upfront for that versatility and for the scalabilities. And so just to give it to you in simple terms what the hybrid does with the size of the cabin is it takes half the batteries that are installed underneath the floor, removes them and puts in a fuel system and then takes the spacious baggage pay, as Stuart said, 70 pounds of bags per passenger and takes a portion of that to put a turbine generator system in. And that's what we're going to prove on one of our full-scale prototypes next year in a demonstration with a hybrid that has the same DNA as the VX4. Same cabin that can seat 6 passengers, same smooth, quiet, safe, full-tolerant capability, because it's a common airframe, common architecture and common systems. And the hybrid development leverages some of the strengths. And the big strength is what Michael talked about is the battery system is what needs to evolve. And it's the intellectual property of developing the algorithms to control the turbine that charges the battery system and the distributed electric propulsion in flight. That is core to vertical. That's what we've invested in. That's our strength. And that's the people that are going to make the hybrid derivative a fast evolution of the VX4. And the ability to fly a hybrid at longer ranges, of course, opens up military applications. And those applications can include logistics and it can include shipboard operations. And I want to make a little comment about shipboard operations, again, from my experience because I've worked with some defense programs in the past. The -- if you've ever watched some U.S. Navy operations, vertical lift aircraft, H-60CHawk or V-22 Osprey landing or taking off from a ship deck, you'll see that it doesn't spend a lot of time hovering a few feet above the deck. That's because the wake of the propeller systems interacting with the deck creates this turbulent environment. And the technology of the legacy helicopters and tilt rotors just can't control it precisely. So they'll plant it fast on the ground from an altitude above the deck. The VX4, that's not a problem, and we've already demonstrated that on our 2 full-scale prototypes. And that's because of the modern technology of distributed electric propulsion, 8 propellers, 4 tilts, 12 surface control effectors that can control the aircraft computer controlled for precision hover, precision shiptbard takeoffs and landings. And this is the powerful flight control system that we're developing with Honeywell. And this powerful flight control system is one small step from full autonomy. And you think about that full autonomy is going to open up a whole new realm of applications, in particular, for military, defense and logistics. That provides an element of survivability. And the survivability is even enhanced by the VX4's basic configuration, which has a much, much lower acoustic signature than legacy helicopters and has the ability to switch into all electric mode and go low on a thermal signature. So if you look at the tactical applications, there is a wide, wide range. And from my experience dealing with the United States Navy, to give an example, the H-60 SeHawk flies a lot of missions that can be flown more cost effectively by a modern VTOL aircraft. It usually doesn't use the full 4,000 pounds of payload that it needs. H-60s will be launched to go take a look over the horizon and report back to the captain. They'll be launched to go take a container of parts from one ship to the next. Those can be done more cost effectively with the VX-4. And if you think about the economic value because government procurement agencies, they care about the economics. They care about the performance, of course, but they also care about the economics. The ability to procure a commercially developed aircraft, a dual-use aircraft will save governments a long time that they typically use on a development program development technology and save them development cost and with the VX4, provide an asset that can do multiple missions with aircraft. Right now, we're already in discussions with the United Kingdom Ministry of Defense and other NATO counterparts about the various use cases for the VX4, and it gets into a wide range of applications that the legacy helicopters right now just aren't fitting the need in terms of cost effectiveness and versatility. So if you think about commercial plus defense, it looks to me as if the legacy -- the era of these legacy helicopters is about to be disrupted. As an example, which is probably a little too close to the people here, there was a tragic accident where Bell 206 crashed in the Hudson River earlier this year killing all on board. So Bell 206 is a great helicopter, and I spent a lot of time around it working in my -- working for Bell helicopter for a 1950s technology. It was certified by the FAA in the 1960s to a 1960 safety standard. So you think about that, that's 60 years of safety improvements and lessons not incorporated in helicopters flying around your city. Would you feel comfortable driving to and from work in a car with 1960 safety standards? Would you feel comfortable flying over the ocean with your family in a Boeing 707, a 1960s safety standard? No, of course, not. So a couple of things I want to leave you with. Number one, Vertical Aerospace has the experience and the knowledge to certify the VX4 to airliner safety standards. The VX4 design and its hybrid derivative are positioned right in the sweet spot of the demand for future vertical lift for both commercial and military. And Vertical Aerospace, with the certification process in place and the scalability and versatility of the design, are positioned to move fast when it matters most. And from a personal perspective, as much as I love my engineering career that I built here in the United States, as much as I love living close to family and being able to watch my Philadelphia Eagles without standing up to 3:00 in the morning for a prime time game. From an engineering perspective and the opportunity -- the once-in-a-lifetime opportunity to be part of making the future vertical lift a reality, the decision to join Vertical Aerospace was a no-brainer. And with the team here at Vertical, I'm ready to help unlock the third dimension and bring point-to-point air mobility, clean, safe, quiet and affordable to the masses across the globe. And I hope you're ready too. I know Domhnal is ready. So I'll turn it over to him.

Thank you very much, David. So you see what I mean when you get that level of excellence and brilliance -- engineering brilliance. We're on the last segment of the day. We're almost on time. I get the privilege now to introduce Professor Scott Galloway. Scott is going to join us on stage. I'm certainly not going to give his career, his amazing insight and knowledge on multiple sectors, any sort of credibility. He'll do it himself. But the most important thing is, he has written a cheque and bought shares in this company twice. He's a significant investor in the company. I'd like you to welcome Scott Galloway to the stage, and he will introduce subsequently Lord Andrew Parker.

Good afternoon. I'm Taylor Swift. So I'm here just as an man on the street to speak openly and honestly about why I invested. I invested $4.5 million. I don't believe in discretion around finances. I think it's a strategy, the top 1% deployed to keep the bottom 99% financially literate such that the people in this room garner a disproportionate amount of resources. Another talk show. I have a podcast, so I talk very openly and honestly about my investments. This is my biggest investment of the year. I am not getting any additional options or equity for investing. This is just a straight capitalist move from someone who's making a big bet. And the reason I'm making this big bet is for 3 reasons. One, in terms of product market fit, I've been literally molesting the globe for 30 years. I know a lot from a consumer standpoint about aviation. The hiccup in the supply chain or the product market experience is the last of the first mile, I don't know what you call it. It's going to take me 80 minutes to get 6 miles of the airport in about 45 minutes, and it's going to take me 80 minutes to go another 500 miles. It's pretty clear where the chokehold is or where the choke point is. In addition, I have never seen a worse product or felt a worse product more ripe for disruption than helicopters. I feel safe whenever I'm in the air with one exception when I'm in a helicopter. And you sit there thinking, this is the dirtiest dangerous, most expensive technology we experience on a consumer level. There's never been a product category more ripe for disruption. The second is more geopolitical. And that is if you look at what is happening in the EU, we're essentially because of a lack or a breakdown of the relationship between the EU and the U.S. and very aggressive actions of Putin, you have the -- essentially the EU is going from at least 2% to 3% of GDP in terms of defense spending. Poland is going to 5%. So what do you have? You literally have an incremental $200 billion CapEx that wasn't anticipated just 24 months and see above that strained relationship with the U.S., there are a small number of recipients who are eligible for that incremental $200 billion a year incremental investment. If you type into ChatGPT, give me an EU defense company with more than $1 billion market cap, it's like 3 or 4 companies. There's maybe 20 or 30 total. So I think all of that spending is going to have real priority. Any EU or European-based company is going to have, in my opinion, a tsunami of capital searching for a place to put it. The final one is I look at companies with a bottoms-up valuation standpoint, we're trading at $500 million. Our 2 competitors are at, I think, $6 billion and $12 billion. What is it, Jason? Is that right? So we're at 12x and 24x. Now what's the gap? I've had much smarter people than me look at the design and look at the technology, and they said, actually, it's a pretty good design. It's on par, maybe even slightly better than one of them is the honest feedback I got back. This is a good bird. This is good technology. The gap or the delta and that extraordinary gap in valuation is one in security around our ability to raise enough capital for what is a capital-hungry sector, aviation, right? And this is where I've known Jason for 25 years, I've co-invested with them several times, worked with them for 10 years, been on boards with them. Jason is very good at raising money. So if I wasn't confident we couldn't solve that one problem that I think is the primary fulcrum of that delta between us and 12x and 24x, I think that's a real upside. And just to close out before I bring up floor to Andrew, I'd like to be sober about this stuff. This sector is littered with upset investors, right? This is a risky -- I think this is a risky sector. And I see this as something that is a very risky investment. I also see it as something that is -- I think I get my money back because it strikes me that if we get in trouble, there's a couple of overfunded companies that would probably sweep in and acquire us. Just to be -- I'm just -- again, being just very honest about how I go through this analysis. I also see a fairly nonzero probability that this is a 10 or 20x. So when I look at, okay, third, this ends up like another aviation company that was big on promise, low on performance and an ugly investment, that's a real possibility here. Another outcome, nice return, not a crazy return, but a good return based on an acquisition for someone looking for European presence in a sector that is clearly getting a lot of momentum and then what I would call real possibility for dramatic upside. So I just see asymmetric risk to the upside here as is evidence, and I'll circle back to the very beginning. I don't sit on funds. I'm not deploying someone else's capital. I'm deploying my own capital. And as I said, I'm not getting any additional options or juice in this deal other than what I've invested alongside of you guys. Anyway, with that, I'm going to bring up Lord Andrew Parker for a conversation.

We met like 60 seconds ago -- to each other. So this is an exploration for us, too. So give us -- first off, I think everyone wants to know what is MI5? And what's the difference between MI5 and MI6?

Yes. Mathematically, one. MI5 is the U.K.'s National Security Agency charged with protecting the United Kingdom against threats of all sorts, but by which -- if I say threats, I mean things that are basically covert and with mal intent. And national security means the same, I guess, here, but quite a specific thing in the U.K. We would say national security is concerned with any sorts of phenomena which threaten or endanger the life of the country or the people who live there in some sort of systematic way. So a single instance, probably not enough. And so of course, then it's dealing with -- terrorism is dealing with espionage, sabotage, cyber issues and so on, and doing so in partnership with the other U.K. intelligence agencies. So the U.K. is blessed for some very particular reasons with having agencies that work more closely together than probably any counterparts anywhere else in the world. The reasons for that are because of all the bad things that have happened, and we've been driven together through all sorts of tragedies and catastrophes that have happened. MI6 is the overseas operational agency, part of that family with stations overseas and operations overseas. And the third one is GCHQ, which is very much like NSA in the States and is doing the cyber dimension and dealing with threats and capability in that realm. And the 3 come together quite powerfully and work extremely closely and more closely with the U.S. than with any other country in the world and have done so for decades and decades, certainly back to the second World War. And when people talk about the special relationship between the U.K. and the U.S., which really is a thing. Actually, when you strip it right back at the core of it, it's about intelligence. It's about nuclear deterrent, and it's about special forces. So it's about all of the sort of core shark stuff that special about the capabilities of our 2 nations.

So you obviously have a bird's eye view or a unique perspective into threats, what's going on geopolitically, how it intersects with the defense industry. Try and connect those dots with why you decided to go on the Board here.

Sure. I will do that. I'll -- if it's okay, Scott, I'll take a few minutes to do it because it's a little bit of a story. Look, I spent 30 years in MI5 after graduating from Cambridge, and then another 7 years as the Director General, the boss of it, so 37 in all. In a career that is, I suppose, one way to describe it, as I sometimes do is punctuated by where were you when moments like, of course, 9/11 but for the U.K. more locally, 7/7 in 2005. And sometimes when I talk to people in the States, they say actually, I knew where I was that day that happened in London. And then from that, a big wake-up call for the U.K. that this calling Al-Qaeda terrorist threat was actually local as well as international. The U.K. spent -- and I was the Director of counterterrorism in MI5 then. We spent a year completely reinventing what it took to do counterterrorism in the U.K. and all sorts of new cutting-edge capabilities in data and in human resources and in international operations, even closer international working. And that led up to the -- you've all been given a bottle of water, haven't you, under your chairs. You do -- any of you know or remember the reason you can't take that on a plane as we're talking aerospace. The reason is because of what happened a year after 7/7 in the U.K., which was that we created a much more powerful counter-terrorism machine in MI5, successfully detected a growing plot from Al-Qaeda, which was -- which had been hatched in the travel areas of Pakistan and was intended as their plot to outdo 9/11 -- to outdo 9/11. And in 2006, Al-Qaeda in a big, complicated, highly developed operation using some explosive technology they researched and developed in Pakistan, tried to launch an operation, which would have brought down a minimum of 7 airliners on different U.S. cities on the same day in August, in peak of the holiday period, in August 2006. So I've just told you my worst day in my career, 7/7 happened on my watch and my best day when something didn't happen. And so not many people know the story, it isn't a massive. But think what would the conversation be these days if that would happen? What would have happened to aviation? So big moments like that, big risks needing to see around corners, needing to -- as far as you can, not let yourself think linearly about complex geopolitics -- and being ready for the surprises that inevitably come. And so after that, then, of course, we had the so-called Arab Spring, which had -- some people were smiling thinking outbreak of democracy. I had my head in my hands thinking this is going to be a disaster for security. And it was an Islamic state was born and then we had all of those threats that came from that. We had growing Russia threat in Europe and espionage. We had assassination plots, use of chemical, weapons to murder somebody in Salisbury for the first time, and cyber, cyber, cyber, cyber, and it's going, going, going, going. And behind it all, the biggest strategic security threat for the rest of all, which has always been China in my lifetime, and has just steadily grown and grown and grown and grown and grown. And today, to answer -- to actually answer your question about how does that position me to think about defense? Well, throughout that time and particularly as the Director General of MI5, I was part of the National Security Council of the U.K. and I was involved in some NATO bodies and lots of international work with other countries. And part of my job was to help give advice where I could to Prime Minister's and Secretaries of State and so on. And I did my best to do that either in crisis or in peace time. And I suppose I learned an enormous amount about how the whole machine comes together across the different intelligence agencies, but then out into defense, into military, into international operations and how you can construct a response to complex geopolitical situations or not respond. And one of those, of course, is what we've seen play out in Europe lately. You mentioned Putin's adventures. And I think for a long time, for a long, long time, and I've spoken publicly about Putin long before this happened, we've been confronted with an adversary in Russia where if -- look at me a next spook. If you put a spook in charge, which is Putin used to be a spook in East Germany in the old days, look what happens. So don't put me in charge. But he has always all of his life, and you just have to read his speeches, things he said going back decades, all of this that's playing out now is the pattern that he's talked about, which is all about the victimization that he feels Russia has suffered, the dispossession he believes the Soviet Union suffered by losing its -- losing its Republic and becoming Federation of Russia. And how many -- and so many military adventures, almost too many to list since he has been in charge around Russia's borders until you get to one that suddenly gets our attention. And it gets our attention, everybody's attention because it's in Europe and it's Ukraine and it's a country that has all those European borders. And it is Putin doubling down against -- probably against advice, definitely against attempted diplomatic pressure from NATO countries and Western nations behind the scenes to discourage didn't work, doubling down on his agenda. And you then see the rippling effects of that. Do you want me to talk about that?

No. I'm curious -- well, first, I want to make sure we understand why you went on the board. But before that, the thesis -- my thesis that we're about to see one of the greatest increases in capital expenditure on a sector in recent history, you were operating at the highest levels. A, do you buy into that thesis? And also, is there an appetite to spend that money domestically as opposed to what typically the EU has done and they look to Northrop Grumman or great -- outside of Dassault or BAE or whoever. But the thesis around this massive atypical capital investment that's going to go into EU defense companies. Do you buy that?

I do buy it. And I was -- as you were very quickly and in a very impressively brief way that I can't mimic, I was -- as you went through it, I was mentally ticking those points. I'll tell you why. What's changed is, first of all, as I was starting to say, this massive shadow of threat across Europe that has got European countries in fear of what's next. And there has always been a next with Putin, right? So what is next? And it's easy to guess at other neighboring countries. But in 2, 3 years' time after Ukraine is over, there's another next probably. So first thing that's different is the threat is much sharper. Second thing that's different is that the U.S. has put Europe under pressure perfectly, reasonably and understandably to actually pay up its NATO commitments, which previously were 2%, but many NATO countries were not paying even that and to increase that further. And so the plan is across NATO countries in Europe, which is most to get up to 3.5% and in fact, aim for 5 if you include defense-related spend. And the financial effect of that, well, it's, as you said, that -- if you add up all the aggregate spending in Europe on defense, currently, I'll do big handfuls. So these are not exact disclose to the market special numbers. But the big handful thing, $400 billion currently, plans for that to grow over the next 5 years to $600 billion is what the stated intent roughly adds up to. So that's a 50% increase. And if you look at it as cumulative spend, again, big handfuls rounded up. The last 5 years would come to about $2 trillion. The next 5 years looks set to come to about $3 trillion. So $1 trillion extra spent over the next 5 years. And then the final thing I was going to say that's changed is, of course, the technology landscape and the lessons learned from conflicts like Ukraine and the demand for lower cost and different approaches. And so for example, the U.K., in its strategic defense review, has talked about this 20-40-40 model that maybe some of you have heard of with aircraft, which is 20% in the traditional model of a [ powerlift aircraft ], high expense, fifth, sixth generation fight, all that stuff. 40% then which is reusable, but preferably uncrewed. And 40% disposable, so into drones territory. And what we're talking about and you hear, and I'm sure you were looking it out for yourselves listening to David talking about the hybrid is in that 40% reusable and potentially autonomous. So why Vertical for me? Well, look, I've had an incredibly privileged career to be able to lead MI5, I regard as a humbling honor and I genuinely do. I didn't join MI5 to lead it. I joined it to do operations, right? I ended up leading it fantastic. After that, Queen Elizabeth made me her most senior official, it's called Lord Chamberlain, a huge honor. And I then -- I also joined the Board of Babcock, the defense company and has been on that Board for 5 years. I've learned quite a bit about how defense industry works from the commercial side and from business to government. But for all those reasons, and because of all that sort of privilege of position, and I'm sure Scott, your inbox must be full all the time because of your prominence. But you get a lot of offers, right? I get a lot of offers of interest in positions and roles and so on. So why Vertical? Because it's magic, right? Look, we've held you hostage here this afternoon for hours, and you're doing very well. And thank you for all coming in for your attention, and it's great that you still got your eyes open. But you've got your eyes open because this is a fantastic product. It is a piece of magic because here's the opportunity, this is how I reacted to it. Here's the opportunity to be part of the next big disruptive wave of change, and it happens to be in aviation. I'm not an expert on aviation. I know a bit about defense. I know a bit about business with government. I know a bit about how to -- how boards work and how you can run a company. But the exciting idea is the big thing and quickly followed up for me by not the numbers in the spreadsheet so much, all the stuff that you guys are all experts on. I did have somebody look at that for me. But the thing I most wanted to do then was meet the people who run it because throughout my life, the thing that I've learned by experience and not because I read books about it is in the end, with any enterprise, the key to success is the quality of the leadership at the top, the translation of that into collective alignment in single endeavor beneath with an energized culture and a set of values that I could recognize. And I don't see all those things all the time around me. But when something has those things and has the magic idea, that's for me. This thing is magic, and it is going to work, and you've heard all of the explanations about it today. I'm excited to be part of it. I think like you are, Scott, having just -- I didn't -- we didn't know each other at all, but I've just heard you say what you said about why you've jumped in. Yes.

Well, I'll tell you what, just as the last thing. We can -- just met each other, but we can do a transaction. I'll trade some of my inbound offers for your title. I just -- that's got to be...

Look, I have a few to spare...

I'm going out of London. I do some strange by [ Nashville ], and I just love the wrap. Scott, Lord Scott Galloway. What do you say? That's a good wrap. Let's give it up for Lord Andrew Parker.

Thank you, Scott. Thank you, Andrew. I'll wrap this up very, very quickly. I know we've kept you -- as Andrew said, kept you hostage. This time last year, in a phone box, Jason and I, today, we've had the most outstanding guests from Tony, flying in for 22 hours. Scott Galloway, bringing his presence and his investment thesis to us. With Savi and with Jim, I cannot thank you enough. Special thank you for all the investors. You placed your trust in me and the team to bring this to market. Huge thank you. What have you learned today? We're doing clean, safe, silent, scalable and importantly, at a mass transport cost. This is truly revolutionary, truly revolutionary. What you got to remember, transition, 20 seconds. That's all we've got to do, 20 seconds, major certification and technology unlock. Certainty that this product works and we can certify it. We're building them in Bristol, less than $700 million, guaranteed to be less than $700 million. We know what we're doing. I wanted to leave you with one thought. Why is Vertical the only company in the sector? Why are we the only ones in the sector with a clear, honest, transparent discussion on certification -- backed up by clear, transparent financial operating metrics. Why is it only Vertical? Because we're the only ones that know what we're doing. We are industry-leading by far on bringing an aerospace product to market. It sets us apart from every single other player. So thank you. It's been great to see you all. We'll be hanging around for questions with the cocktails if you want to grab us.