UPDATE – Embraer will integrate its urban air mobility subsidiary Eve UAM into Zanite, a special purpose acquisition company (SPAC) that is focused on the aviation sector. Zanite will rebrand as Eve Holding but Embraer Aircraft Holding will keep approximately 80 percent of the equity. Eve Holding will get a listing on the New York Stock Exchange, it was announced on December 21. Zanite acquires Eve UAM but keeps strong ties with Embraer.
Cleveland-based Zanite, which itself started trading at the Nasdaq in November 2020, has been looking for opportunities to invest in the aviation, aerospace and defense, UAM, and emerging technologies markets. It owns Directional Aviation Capital, which operates over 175 aircraft within groups of private aviation companies. Through its Halo affiliate, Zanite has already ordered 200 Eve aircraft.
Eve was created in 2017 under the market accelerator EmbraerX program and became an independent company in October 2020. Through 2021, Eve has been announcing orders, partnerships, and agreements with future operators of its eVTOL, which should get type certification by late 2025 and enter service in 2026. According to Eve, it has a backlog worth $5.0 billion for 1.735 Eve vehicles from seventeen customers, including firm orders and non-binding Letters of Intent.
Zanite selects Eve after an extensive search
With Embraer looking to trust Eve onto the market and Zanite looking for prospects, the two found each other in the deal announced today. “After an extensive search, we selected Eve because of its simple and certifiable eVTOL design, its capital-efficient approach to fleet operations, and Embraer’s global footprint that we believe will enable Eve to not only reach vehicle type certification but to scale its manufacturing, support, and operations globally,” said Kenn Ricci, co-CEO of Zanite, in the press release.
“We believe that the urban air mobility market has enormous potential to expand in the coming years based on an efficient, zero-emissions transport proposition and that with this business combination, Eve is very well positioned to become one of the major players in this segment,” said Embraer President and CEO, Francisco Gomes Neto.
During the webcast, he added: “Why did we spin out Eve into a separate company? By doing so, we are providing Eve with the best of both worlds – the focus and agility of a technology disruptor, with the experience, scale, and resources of a global aviation leader. As an independent company, Eve is free to swiftly pursue new business models, partnerships, and investors that would not be possible as a business unit of Embraer.”
Eve Holding is projecting a steep increase in revenues until 2030. (Zanite)
The agreement includes the transfer of Eve units in exchange for 220 million Zanite shares. Zanite will rebrand as Eve Holding, with Eve becoming a wholly-owned subsidiary of Zanite. The combined business is valued at $2.4 billion.
Through a private investment in public equity (PIPE) at $10 per share, Embraer will invest $175 million. Zanite Sponsor has committed to $25 million, while $105 million will come from investors Azorra Aviation, BAE Systems, Banco Bradesco, Falko Regional Aircraft, Republic Airways, Rolls-Royce, and SkyWest. Adding these $305 million to the $237 million in cash will give Eve Holding $512 million in cash. Proceeds will be used to develop and commercialize the eVTOL vehicle.
Embraer’s support network key to Eve’s success
This translates into a 77.3 percent share of Embraer in Eve Holding, 10.6 percent from PIPE investors, 8.0 percent from Zanite public shareholders, 2.2 percent through strategic partner warrants, and 2.0 percent through Zanite founder shares. Embraer and Zanite have agreed on a three-year lockup of shares. Embraer has granted Eve a royalty-free license to Embraer’s background intellectual property to be used within the UAM market. Eve will also be able to tap into the engineering resources of Embraer, including some 1.600 engineers.
Eve points out that it can also use the airframers global infrastructure of ten service centers, 24 warehouses, 66 third-party centers, simulators, and pilot training centers. This should give it an edge on costs and support over its competitors Vertical Aerospace, Archer, Joby, Lilium, and many others that try to enter the UAM market which is valued at some $760 billion.
As Ken Ricci said: “Eve’s vehicle is based on a simple design that is more straightforward to certify and more efficient to operate than any of the other options like tilt-rotor aircraft. I might mention that in addition to the complexities of the flight control systems and higher production and maintenance costs related to tilt-rotors, that there has never been a civilian certification of a tilt-rotor to date. Secondly, we avoided any of those companies where their vision was to both build and operate the vehicle. (…) While Eve will participate in supporting fleet operations markets all over the world, Eve is not an airline and will not carry aircraft on its books or
compete with its potential customers.”
Ricci added: “We weren’t interested in just finding a “cool” design, we were also focused on the ability to bring a vehicle to a revenue-producing business model. We saw a lot of focus on type certification throughout this process, but the really difficult aspect is achieving production certification. Here, unlike other opportunities, Embraer has excelled by far. They have had tremendous success in bringing aircraft to production certification.” He noted that the prime markets for Urban Air Mobility will be located outside the US and North America: “Only Embraer has the infrastructure in sales, service, and support to allow Eve to have a worldwide presence, and this will give Eve a significant competitive advantage.”
Interesting comparison of Eve with the other major players in the eVTOL market. (Zanite)
SkyWest and Republic Airways placed launch orders with Eve for 100 and up to 200 eVTOLs respectively. Both airlines will now become strategic investors in the new Eve Holding. Helicopter operators Avantto ordered 100 aircraft, Zanite’s affiliate Halo up to 200 just like lessors Falko and Azorra. Both lessors will be strategic investors. BAE Systems will become a defense partner on the project and has also subscribed as a strategic investor.
Revenues to clear $3.0 billion in 2030
After Eve has entered service in 2026 and deliveries commence, Eve Holding is projecting a sharp rise in revenues. The first year with just 75 deliveries will be modest at just $305 million, but revenues should clear $1.1 billion in 2027 with 2340 deliveries, $3.0 billion in 2029 at 801 deliveries, and rise to $4.5 billion in 2030 at 1.117 deliveries. By then, fleet operations and service and support revenues are expected to account for 44 percent, with the remainder coming from sales. Eve Holding project to become profitable in 2027 with an EBITDA of $67 million, but by 2030 should produce a solid EBITDA at $840 million.
The transaction is expected to close in the second quarter of 2022. Eve Holding will get dual leadership, with the current CEO Andre Stein joined by Jerry DeMuro, who recently joined from BAE Systems.
During the webcast, he said: “Eve has all the ingredients to be a true leader in this market. We have a great product and team, the long-term backing of Embraer, the endorsements and resources of world-class partners, a $5.2 billion order pipeline through letters of intent, and with this announced transaction with Zanite, the financial resources to realize our vision.”