By Jon Sindreu

Though investors' attention has been focused on the failure of Nikola, the electric-truck maker that briefly had a higher market capitalization than Ford Motors, a similar trend has been quietly playing out in aviation.

It was almost yesterday that this industry aimed for a utopian tomorrow of electric and hydrogen aircraft. And, judging by the rally in the stocks of the makers of air taxis -- properly called electric vertical takeoff and landing vehicles, or eVTOL -- this future is still on the table. Joby Aviation and Archer Aviation, which report earnings next week, are up 48% and 213%, respectively, since the Nov. 5 election. Investors seem to be putting a lot of weight on statements by President Trump and the new transportation secretary, Sean Duffy, arguing that the U.S. must win the eVTOL race with China.

Look beyond these top air-taxi players, however, and in-development clean-aviation marvels have been dropping like flies.

Germany's two main eVTOL startups, Lilium and Volocopter, are now undergoing insolvency procedures. Like Nikola, many of these ventures were in great part a legacy of the blank-check special-purpose acquisition company boom that overtook Wall Street in 2020 and 2021. But they eventually ran out of cash following a string of setbacks.

Other zero-emission aviation projects have been paused, including ATR's hybrid-electric turboprop, as well as Airbus's own eVTOL and its ZEROe project, aimed at launching a hydrogen-powered commercial airliner by 2035.

Airbus Chief Executive Guillaume Faury told analysts Thursday that hydrogen infrastructure and fuel cells are scaling up too slowly. That even Airbus -- once the industry's green champion, as opposed to the more pragmatic Boeing -- is pulling back on sustainability speaks volumes.

Is the main problem technological, as Airbus claims? To a certain extent, yes: The viability of all of these types of zero-emission vehicles depends on immature technologies.

Sourcing hydrogen was already a big impediment to selling Nikola's trucks, and getting airports ready to refuel hydrogen planes would be even harder. Faury is also right that fuel cells are too heavy to power the larger aircraft Airbus cares about. Meanwhile, the performance of batteries is a key limiting factor for eVTOL.

Crucially, getting aircraft certified is much harder than commercializing a truck. In 2022, the Federal Aviation Administration decided to classify eVTOL vehicles in a special category -- which would be the first new category of civil aircraft since helicopters in 1940 -- and later proposed quite stringent rules. This makes sense, because these vehicles need to be able to withstand inclement weather while transitioning from vertical to horizontal flight, often involving multiple tilting rotors.

Hydrogen aircraft are also eyed suspiciously by regulators because of, among other reasons, the high flammability of the gas -- as the infamous 1937 Hindenburg disaster etched in everybody's minds.

But these obstacles aren't unsurmountable if enough cash is thrown at them. For one, Joby's aircraft has already flown more than a 100 flights with a pilot onboard, and is relatively advanced in the certification process. Likewise, British-American startup ZeroAvia has made significant advances in hydrogen fuel-cell propulsion for small planes.

It may be that funds are merely shifting to front-runners, including the Californians Joby and Archer. The former recently raised a further $500 million from Toyota. The latter brought in $300 million from institutional investors earlier this month, and is pivoting toward defense applications.

If this is the case, a friendly regulatory environment could give them a push.

Still, it seems undeniable that this sector was greatly inflated by green marketing at a time when "flight shaming" was a real concern, and big eVTOL orders were smart public-relations moves for the likes of American Airlines and United Airlines. This tended to favor eye-catching technological pitches.

Yet the practical next steps are probably more mundane than air taxis and hydrogen powertrains, and involve sticking a battery in a short-range regional plane. This is what ATR was doing, as well as Airbus with its E-Fan X hybrid-electric demonstrator that it then replaced, with great fanfare, with its 2035 hydrogen ambitions. Israeli-American startup Eviation was trying to do this too, but with a wholly-electric aircraft, yet it has recently had to halt development, as first reported by The Air Current.

Why have these projects been unappealing? Because regional flights make up just 10% of commercial aviation, offering would-be disrupters high risk with limited reward. eVTOL investors were initially lured in by claims of a $1 trillion market for air taxis, but what they actually have is a longer shot at upending the $50 billion helicopter market.

By removing the green hype, the Trump era could end up being quite unkind to them.

Write to Jon Sindreu at jon.sindreu@wsj.com

(END) Dow Jones Newswires

February 21, 2025 07:00 ET (12:00 GMT)

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